Launched on 07/10/2001, the iShares Semiconductor ETF (SOXX) is a smart beta exchange traded fund offering broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Blackrock, and has been able to amass over $9.25 billion, which makes it one of the largest ETFs in the Technology ETFs. Before fees and expenses, this particular fund 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
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 0.90%.
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.
This ETF has heaviest allocation in the Information Technology sector - about 100% of the portfolio.
Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 8.81% of total assets, followed by Broadcom Inc (AVGO) and Advanced Micro Devices Inc (AMD).
The top 10 holdings account for about 57.9% of total assets under management.
Performance and Risk
So far this year, SOXX return is roughly 46.52%, and is up about 44.55% in the last one year (as of 09/07/2023). During this past 52-week period, the fund has traded between $298.68 and $535.64.
The fund has a beta of 1.32 and standard deviation of 34.70% 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.
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 $1.54 billion in assets, VanEck Semiconductor ETF has $10.12 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.
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
Advanced Micro Devices, Inc. (AMD): 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