Best semiconductor ETFs of July 2024
“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
BLUEPRINT
Updated 11:31 p.m. UTC July 2, 2024
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The U.S. technology sector has driven growth in the broader market over the last decade. What do these top tech companies have in common? A reliance on chips produced by semiconductor companies to power hardware products and software services.
“Semiconductor ETFs offer diversification and exposure to the industry as a whole,” said Justin Zacks, vice president of strategy at trading platform Moomoo. “Investors should be aware of volatility, even in semiconductor ETFs with many holdings.”
To help investors find the best semiconductor ETFs of 2024, we surveyed U.S.-listed options, ranking them based on total assets, expense ratios and more.
Best semiconductor ETFs
- VanEck Semiconductor ETF (SMH).
- iShares Semiconductor ETF (SOXX).
- SPDR S&P Semiconductor ETF (XSD).
- First Trust Nasdaq Semiconductor ETF (FTXL).
- Invesco Dynamic Semiconductors ETF (PSI).
- Invesco PHLX Semiconductor ETF (SOXQ).
VanEck Semiconductor ETF (SMH)
iShares Semiconductor ETF (SOXX)
SPDR S&P Semiconductor ETF (XSD)
First Trust Nasdaq Semiconductor ETF (FTXL)
Invesco Dynamic Semiconductors ETF (PSI)
Invesco PHLX Semiconductor ETF (SOXQ)
Compare the best semiconductor ETFs
| FUND (TICKER) | INDEX | EXPENSE RATIO | TOTAL ASSETS |
|---|---|---|---|
VanEck Semiconductor ETF (SMH)
| MVIS US Listed Semiconductor 25 Index
| 0.35%
| $22.6 billion
|
iShares Semiconductor ETF (SOXX)
| ICE Semiconductor Index
| 0.35%
| $15.1 billion
|
SPDR S&P Semiconductor ETF (XSD)
| S&P Semiconductor Select Industry Index
| 0.35%
| $1.5 billion
|
First Trust Nasdaq Semiconductor ETF (FTXL)
| Nasdaq US Smart Semiconductor Index
| 0.60%
| $1.6 billion
|
Invesco Dynamic Semiconductors ETF (PSI)
| Dynamic Semiconductor Intellidex
| 0.57%
| $912.6 million
|
Invesco PHLX Semiconductor ETF (SOXQ)
| PHLX Semiconductor Sector Index
| 0.19%
| $475.3 million
|
Methodology
Our curated rankings of the top semiconductor ETFs were created by applying a screen of several “must-have” metrics:
- Total assets: All semiconductor ETFs on this list have accrued at least $100 million in total assets.
- Exposure: ETFs on this list must offer pure-play exposure to semiconductor stocks and not be broad tech sector ETFs with semiconductor exposure.
- Type: Semiconductor ETFs featuring leveraged, inverse or single-stock exposure are not eligible for this ranking.
- Expense ratios: To qualify for this ranking, a semiconductor ETF cannot charge a net expense ratio higher than 0.6%.
- Strategy: Semiconductor ETFs on this list must track and replicate the holdings of a benchmark index and cannot be actively managed.
An experienced ETF analyst selected the ETFs above, but they may not be right for your portfolio. Before purchasing any of these ETFs, do plenty of research to ensure they align with your financial goals and risk tolerance.
Why other funds didn’t make the cut
We began by screening for ETFs that explicitly offer “pure-play” exposure to semiconductor stocks as opposed to broad technology sector exposure. While many technology ETFs have some exposure to semiconductor stocks, they may also feature non semiconductor companies, such as software developers and cloud computing companies.
Next, we excluded more exotic variants of semiconductor ETFs that are best suited as short-term trading tools. These include leveraged, inverse and single-stock semiconductor ETFs, which tend to be more volatile and have higher expense ratios. These products are generally not intended for a long-term hold.
Next, we restricted our list of semiconductor ETFs to only those that tracked and replicated the holdings of a semiconductor index. Therefore, actively managed semiconductor ETFs, which select stocks based on a fund manager’s proprietary strategy, were excluded.
Finally, we set a minimum requirement for total assets and a maximum cap for expense ratios to ensure that selected semiconductor ETFs were sufficiently large and affordable for investors.
Final verdict
Semiconductor ETFs can be a transparent, liquid and affordable way of quickly gaining exposure to the top semiconductor stocks on the market. Their professional management can help investors save time and money compared to self-managing a portfolio of semiconductor stocks.
Our pick for the best semiconductor ETF goes to VanEck Semiconductor ETF (SMH). Despite not having the lowest expense ratio on this list, SMH’s massive total assets of over $17 billion, high liquidity and exposure to both U.S. and foreign semiconductor stocks are great perks. At a 0.35% expense ratio, SMH is still affordable. It also sports a five-star Morningstar rating.
How to choose a semiconductor ETF
Choosing the right semiconductor ETF requires a thorough understanding of your investment goals, risk tolerance and the factors influencing the semiconductor industry. Here are some key points to consider.
- Understand your investment objective: Some semiconductor ETFs focus on large established companies, while others may target smaller or emerging companies, or a blend of both. Identify your investment goals to guide your selection.
- Check the ETF’s total assets: Larger ETFs may provide greater liquidity, making it easier to buy and sell shares without impacting the price too significantly. They also tend to have a lower bid-ask spread, reducing transaction costs. Finally, they tend to be at a lower risk of shutting down.
- Evaluate the expense ratio: This is the annual fee that all ETFs charge their shareholders. Even small differences in fees can significantly impact your investment over time, so look for ETFs with lower expense ratios.
- Assess the underlying index: Always check which index the ETF tracks. Ensure that the index’s methodology for selecting, weighting and rebalancing holdings aligns with your investment strategy and goals.
- Look for sufficient diversification: Even within sector-specific investments like semiconductor ETFs, diversification is key. Look for funds that offer a good mix of semiconductor companies to spread risk. Watch out for ETFs with high concentration in a handful of stocks.
Frequently asked questions (FAQs)
A semiconductor ETF is a type of investment fund that focuses solely on stocks from the semiconductor industry. Like individual stocks, shares of semiconductor ETFs trade openly on exchanges with their own ticker symbols.
By buying shares of a semiconductor ETF, investors can gain exposure to the risks and returns of the underlying portfolio of semiconductor companies. Essentially, they are a way to invest in the overall performance of the semiconductor industry.
Whether or not semiconductor ETFs are a good investment depends on your personal investment objectives and risk tolerance. Generally, a targeted thematic investment like a semiconductor ETF is best suited for growth-oriented investors comfortable with risk, who wish to express a bullish view on the prospects of the tech sector and semiconductor industry.
However, like all investments, semiconductor ETFs come with risks, and it’s important to consider these in the context of your overall investment strategy and risk tolerance.
While the semiconductor industry offers growth potential, it also comes with risks. One major risk is the cyclicality of the broader technology industry. Demand for semiconductors can fluctuate based on various factors, including economic conditions, technological advancements and competition. This can translate to higher volatility for semiconductor stocks and ETFs.
Global supply chain disruptions can also pose a significant risk. The manufacturing process for semiconductors is complex and requires specific raw materials, which can be impacted by geopolitical issues such as trade restrictions or war. In a disruption, semiconductor stocks and ETFs may experience high losses.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
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