For investors seeking exposure to semiconductor Exchange-Traded Funds (ETFs), here are the best 5 Semiconductor ETFs we curated, together with financial metrics to consider.
Key ETF Metrics for Investment Decisions
Before we get to the types of semiconductor ETFs, let's take a brief look at the important metrics that ETF investors should monitor. According to Marco Santanche, an ETF strategist and author of Quant Evolution, there are a few important metrics that ETF investors should look at:
(1) Risk-Adjusted Return (Sharpe Ratio)
Definition: The risk-adjusted return evaluates an ETF's performance by considering both returns and volatility. It provides a comprehensive view of how well the fund has performed relative to the level of risk taken.
Importance: “Risk adjusted return is one of the important metrics I will look at,” says Santanche. “This metric provides investors with a comprehensive view of an ETF's performance, factoring in both returns and volatility. By adjusting for risk, investors can better assess how well the fund has performed relative to the level of risk taken. A high-risk-adjusted return indicates that the ETF has not only generated favorable returns but has done so with lower volatility.”
(2) Maximum Drawdown
Definition: Maximum drawdown measures the largest loss from a peak to a trough during a specific period, indicating potential downside risk.
Importance: As noted by Santanche, “This metric helps investors gauge the potential downside risk associated with an ETF. A lower maximum drawdown implies a more stable investment, which can be particularly important for risk-averse investors.”
(3) Beta
Definition: Beta measures how much risk an investment adds to the underlying portfolio concerning direction and relative volatility.
Read More: An Introduction to Asset Allocation
Importance: “A beta close to zero with respect to a benchmark (e.g. S&P 500) means the ETF has minimal relationship with the S&P500 index,” says Santanche. “This will be advantageous if the goal is to incorporate a "market-neutral" investment into the portfolio"
Best Semiconductor ETFs
(1) SMH - VanEck Semiconductor ETF
Expense Ratio: 0.35%
Assets Under Management (AUM): $11.0 billion
YTD Return: 70.75%
Sharpe Ratio: 0.93
Beta: 1.30
The VanEck Semiconductor ETF (SMH) tracks the performance of the 25 largest and most liquid US exchange-listed companies in the semiconductor industry, employing a 10% capping scheme. The ETF only includes companies that generate at least 50% of their revenue from semiconductors or semiconductor equipment.
(2) SOXX - iShares Semiconductor ETF
Expense Ratio: 0.35%
Assets Under Management (AUM): $9.6 billion
YTD Return: 64.22%
Sharpe Ratio: 0.86
Beta: 1.58
iShares Semiconductor ETF (SOXX) seeks to track the investment results of an index composed of U.S.-listed equities in the semiconductor sector, giving investors exposure to U.S. companies that design, manufacture, and distribute semiconductors
(3) SOXQ - Invesco PHLX Semiconductor ETF
Expense Ratio: 0.19%
Assets Under Management (AUM): $172.5 million
YTD Return: 63.85%
Sharpe Ratio: 0.85
Beta: 1.56
The Invesco PHLX Semiconductor ETF tracks a market-cap weighted index of the 30 largest U.S.-listed companies engaged in the semiconductor business, such as memory chips, microprocessors, integrated circuits and other related equipment.
(4) FTXL - First Trust Nasdaq Semiconductor ETF
Expense Ratio: 0.60%
Assets Under Management (AUM): $1.2 billion
YTD Return: 51.74%
Sharpe Ratio: 0.72
Beta: 1.53
Read More: Factor Investing: A Deep Dive
First Trust Nasdaq Semiconductor ETF (FTXL) tracks Nasdaq US Smart Semiconductor Index, which is designed to provide exposure to US companies within the semiconductor sector. Companies included in the index have been screened by a series of three factors (Volatility, Value, and Growth).
(5) SEMI - Columbia Seligman Semiconductor and Technology ETF
Expense Ratio: 0.75%
Assets Under Management (AUM): $30.5 million
YTD Return: 44.36%
Sharpe Ratio: 0.51
Beta: 1.61
SEMI is an actively-managed, non-transparent fund that seeks capital appreciation by investing in domestic or foreign semiconductor and technology-related companies.
(6) XSD - SPDR S&P Semiconductor ETF
Expense Ratio: 0.35%
Assets Under Management (AUM): $1.4 billion
YTD Return: 34.27%
Sharpe Ratio: 0.24
Beta: 1.83
XSD tracks a popular benchmark of companies that produce semiconductors, and focuses on U.S. stocks entirely, offering investors concentrated exposure to America’s semiconductor industry.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
