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If you're feeling overwhelmed by the stock market right now, you're not alone. The S&P 500 had one of its fastest drops on record in early April, and the Nasdaq Composite hurtled into a bear market, falling more than 20% from its high just in February.
President Donald Trump's trade war with just about every U.S. trading partner and signs of a weakening economy have put investors into a defensive position, and it's unclear when or how this period of uncertainty is going to end.
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At times like these, picking individual stocks is especially difficult so it's worth considering investing in exchange-traded funds (ETF) as an alternative. These investments trade like stocks, but they do the hard work of choosing the stocks for you, typically for a nominal fee. ETFs are either actively managed, meaning a fund manager will buy and sell the stocks inside it, or they track an index like the S&P 500.
If you have $250 in available funds and you're looking for a tech ETF to invest in to capitalize on the recent sell-off, one of the best choices out there is the VanEck Semiconductor ETF (NASDAQ: SMH).
A winning growth ETF
The VanEck Semiconductor ETF tracks the MVIS US Listed Semiconductor 25 Index, which aims to follow the overall performance of companies in the semiconductor production and equipment industry.
The ETF has a long track record of beating the market, as the chart below shows.
As you can see from the chart, not only has the VanEck ETF trounced the S&P 500, but it's also beaten its rival iShares Semiconductor ETF (NASDAQ: SOXX). That gap between the SMH and the SOXX is owed to the SMH's increased concentration.
The table below shows the fund's top 10 holdings.
| Rank/Stock | Weighting | Rank/Stock | Weighting |
|---|---|---|---|
| 1. Nvidia | 19.6% | 6. Texas Instruments | 4.8% |
| 2. Taiwan Semiconductor | 11.1% | 7. Advanced Micro Devices | 4.8% |
| 3. Broadcom | 7.8% | 8. Analog Devices | 4.6% |
| 4. Qualcomm | 5.3% | 9. Applied Materials | 4.6% |
| 5. ASML | 4.9% | 10. KLA | 4.3% |
Data source: VanEck Semiconductor ETF.
As you can see, the ETF is highly concentrated in Nvidia, TSMC, and Broadcom stocks, which make up nearly 40% of the fund.
All three of those stocks have performed well in recent years and are considered leaders in the AI boom. They have also driven the fund's recent outperformance, which has come from the AI leadership of those three stocks.
Why the VanEck Semiconductor ETF is a buy
The SMH's track record speaks for itself as few stocks, let alone ETFs, have jumped by 600% over the last decade. However, past performance does not guarantee future returns in the stock market.