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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.

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%.

Index Details

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.

Costs

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) accounts for about 10.35% of total assets, followed by Nvidia Corp (NVDA) and Advanced Micro Devices Inc (AMD).

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.

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 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) tracks S&P Semiconductor Select Industry Index and the iShares Semiconductor ETF (SOXX) 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

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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VanEck Semiconductor ETF (SMH): ETF Research Reports

Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report

NVIDIA Corporation (NVDA): Free Stock Analysis Report

Taiwan Semiconductor Manufacturing Company Ltd. (TSM): Free Stock Analysis Report

iShares Semiconductor ETF (SOXX): ETF Research Reports

SPDR S&P Semiconductor ETF (XSD): ETF Research Reports

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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