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Should You Invest in the VanEck Semiconductor ETF (SMH)?

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Launched on 12/20/2011, the VanEck Semiconductor ETF (SMH - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Technology - Semiconductors segment of the equity market.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways 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 5, placing it in top 31%.

Index Details

The fund is sponsored by Van Eck. It has amassed assets over $7.15 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.


Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

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 1.01%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Taiwan Semiconductor Manufacturing Co L (TSM - Free Report) accounts for about 10.60% of total assets, followed by Nvidia Corp (NVDA - Free Report) and Qualcomm Inc (QCOM - Free Report) .

The top 10 holdings account for about 58.44% of total assets under management.

Performance and Risk

The ETF has added about 16.60% and is down about -9.57% so far this year and in the past one year (as of 01/26/2023), respectively. SMH has traded between $173.15 and $288.25 during this last 52-week period.

The ETF has a beta of 1.31 and standard deviation of 39.70% for the trailing three-year period, making it a high risk choice in the space. With about 26 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 - Free Report) tracks S&P Semiconductor Select Industry Index and the iShares Semiconductor ETF (SOXX - Free Report) tracks PHLX SOX Semiconductor Sector Index. SPDR S&P Semiconductor ETF has $1.18 billion in assets, iShares Semiconductor ETF has $6.87 billion. XSD has an expense ratio of 0.35% and SOXX charges 0.35%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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