Should You Invest in the VanEck Semiconductor ETF (SMH)?
Designed to provide broad exposure to the Technology - Semiconductors segment of the equity market, the VanEck Semiconductor ETF (SMH) is a passively managed exchange traded fund launched on 12/20/2011.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient 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 8, placing it in top 50%.
Index Details
The fund is sponsored by Van Eck. It has amassed assets over $23.02 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.
Costs
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
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 0.42%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 19.64% of total assets, followed by Taiwan Semiconductor Manufacturing Co L (TSM) and Broadcom Inc (AVGO).
The top 10 holdings account for about 72.97% of total assets under management.
Performance and Risk
The ETF has gained about 41.08% and was up about 69.11% so far this year and in the past one year (as of 08/19/2024), respectively. SMH has traded between $137.46 and $281.27 during this last 52-week period.
The ETF has a beta of 1.34 and standard deviation of 34.75% for the trailing three-year period, making it a high risk choice in the space. With about 27 holdings, it has more concentrated exposure than peers.
Alternatives
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 outstanding 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.
First Trust NASDAQ Semiconductor ETF (FTXL) tracks Nasdaq US Smart Semiconductor Index and the iShares Semiconductor ETF (SOXX) tracks PHLX SOX Semiconductor Sector Index. First Trust NASDAQ Semiconductor ETF has $1.48 billion in assets, iShares Semiconductor ETF has $14.58 billion. FTXL has an expense ratio of 0.60% 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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
VanEck Semiconductor ETF (SMH): ETF Research Reports
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report
iShares Semiconductor ETF (SOXX): ETF Research Reports
First Trust NASDAQ Semiconductor ETF (FTXL): ETF Research Reports