Is iShares Semiconductor ETF (SOXX) a Strong ETF Right Now?

Designed to provide broad exposure to the Technology ETFs category of the market, the iShares Semiconductor ETF (SOXX) is a smart beta exchange traded fund launched on 07/10/2001.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is managed by Blackrock, and has been able to amass over $8.81 billion, which makes it one of the largest ETFs in the Technology ETFs. SOXX, before fees and expenses, seeks to match the performance of the PHLX SOX Semiconductor Sector Index.

The ICE Semiconductor Index measures the performance of U.S. traded securities of companies engaged in the semiconductor business.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for SOXX are 0.43%, which makes it one of the cheaper products in the space.

The fund has a 12-month trailing dividend yield of 0.70%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 100% of the portfolio, the fund has heaviest allocation to the Information Technology sector.

Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 8.91% of total assets, followed by Broadcom Inc (AVGO) and Intel Corporation Corp (INTC).

Its top 10 holdings account for approximately 55.95% of SOXX's total assets under management.

Performance and Risk

The ETF has lost about -14.55% and is up roughly 12.14% so far this year and in the past one year (as of 01/24/2022), respectively. SOXX has traded between $375.21 and $555.63 during this last 52-week period.

The fund has a beta of 1.13 and standard deviation of 34.91% for the trailing three-year period, which makes SOXX a high risk choice in this particular space. With about 35 holdings, it has more concentrated exposure than peers.

Alternatives

IShares Semiconductor ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

SPDR S&P Semiconductor ETF (XSD) tracks S&P Semiconductor Select Industry Index and the VanEck Semiconductor ETF (SMH) tracks MVIS US Listed Semiconductor 25 Index. SPDR S&P Semiconductor ETF has $1.35 billion in assets, VanEck Semiconductor ETF has $7.67 billion. XSD has an expense ratio of 0.35% and SMH charges 0.35%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.

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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iShares Semiconductor ETF (SOXX): ETF Research Reports
 
Intel Corporation (INTC) : Free Stock Analysis Report
 
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
 
Broadcom Inc. (AVGO) : Free Stock Analysis Report
 
VanEck Semiconductor ETF (SMH): ETF Research Reports
 
SPDR S&P Semiconductor ETF (XSD): ETF Research Reports
 
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