Designed to provide broad exposure to the Technology - Semiconductors segment of the equity market, the VanEck Semiconductor ETF (
SMH Quick Quote SMH - Free Report) is a passively managed exchange traded fund launched on 12/20/2011.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Semiconductors is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.
The fund is sponsored by Van Eck. It has amassed assets over $8.16 billion, making it one of the largest ETFs attempting to match the performance of the Technology - Semiconductors segment of the equity market. SMH seeks to match the performance of the MVIS US Listed Semiconductor 25 Index before fees and expenses.
The MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment.
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.68%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Taiwan Semiconductor Manufacturing Co L (
TSM Quick Quote TSM - Free Report) accounts for about 10.35% of total assets, followed by Nvidia Corp ( NVDA Quick Quote NVDA - Free Report) and Advanced Micro Devices Inc ( AMD Quick Quote AMD - Free Report) .
The top 10 holdings account for about 64.07% of total assets under management.
Performance and Risk
The ETF has lost about -26.41% and was up about 3.39% so far this year and in the past one year (as of 05/16/2022), respectively. SMH has traded between $219.65 and $316.56 during this last 52-week period.
The ETF has a beta of 1.20 and standard deviation of 36.60% for the trailing three-year period, making it a high risk choice in the space. With about 25 holdings, it has more concentrated exposure than peers.
VanEck Semiconductor ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SMH is an excellent option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
SPDR S&P Semiconductor ETF (
XSD Quick Quote XSD - Free Report) tracks S&P Semiconductor Select Industry Index and the iShares Semiconductor ETF ( SOXX Quick Quote SOXX - Free Report) tracks PHLX SOX Semiconductor Sector Index. SPDR S&P Semiconductor ETF has $1.09 billion in assets, iShares Semiconductor ETF has $7.50 billion. XSD has an expense ratio of 0.35% and SOXX charges 0.43%. Bottom Line
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