Brocker.Org: Top 5 Semiconductor ETFs of 2017


The PC market has dipped recently, which hurts many semiconductor stocks. However, semiconductors continue to be indispensable in phones, games, cars, military weapons and even home appliances. Also, cloud computing is increasing the number of devices needed to access the cloud.

Though semiconductors continue to be an integral part of modern life, no semiconductor fund is bulletproof. It is important to differentiate between how the semiconductor industry is doing and how any particular semiconductor ETF is performing. (See also: The Truth Behind Trading Semiconductor (Chip) Stocks.)

We chose the top 5 semiconductor exchange-traded funds (ETFs) based on assets under management and performance as of May 14, 2017. The story that emerges when looking at these ETFs is that they have been very stable and have produced significant year-to-date returns. Returns range from 5.97% to 33.87% as of May 14, 2017.

Management is everything. The money managers of the five ETFs listed below have produced strong results. All have positive returns since inception. (See also: What ETF Fund Managers Do.)

However, investors should not blindly trust that such performance will continue. It is reasonable to make semiconductor ETFs part of a diversified investment portfolio, but it is vital to perform due diligence and make sure an ETF’s investment goals match the investor’s risk tolerance and time horizon for investing.

iShares PHLX Semiconductor (SOXX)

SOXX does not allow any single security to have a weight of more than 8% of the portfolio. This weighting restriction means SOXX must search beyond U.S. firms to foreign firms that are listed on U.S. stock exchanges. The result is that SOXX has many smaller companies to complement the large U.S. companies in the portfolio, and that means SOXX may be more diverse than other semiconductor ETFs.

  • Avg. Volume: 492,609
  • Net Assets: $898.3 million
  • Yield: 1.00%
  • YTD Return: 15.31%
  • Expense Ratio: 0.48%
  • Inception Date : October 7, 2001
  • Since Inception: 6.94%

VanEck Vectors Semiconductor ETF (SMH)

This ETF uses the Market Vectors US Listed Semiconductor 25 Index as a benchmark. It invests in both stocks and depositary receipts, though it maintains at least 80% of its assets in stocks that are in the index. Foreign companies are included along with the U.S. firms in the portfolio.

  • Avg. Volume: 2,081,380
  • Net Assets: $730.86 million
  • Yield: .72%
  • YTD Return: 11.25%
  • Expense Ratio (net): 0.35%
  • Inception Date December 20, 2011
  • Since Inception: 22.50%

SPDR S&P Semiconductor ETF (XSD)

The S&P Semiconductor Select Industry Index provides the performance benchmark for this ETF. Note that not all holdings are from the S&P index. XSD commits to having 80% of its assets in index securities, but may invest outside of that universe.

  • Avg. Volume: 101,637
  • Net Assets: $308.68 million
  • Yield: 0.67%
  • YTD Return: 5.97%
  • Expense Ratio: 0.35%
  • Inception Date: January 31, 2006
  • Since Inception: 8.35%

Direxion Daily Semicondct Bull 3X ETF (SOXL)

This is a leveraged ETF. It tries to beat the PHLX Semiconductor Sector Index by 300%. This makes it a higher-risk ETF, but that higher risk is also the reason returns are 33.87% so far for 2017.

  • Avg. Volume: 300,891
  • Net Assets: $236.87 million
  • Yield: 0.00%
  • YTD Return: 33.87%
  • Expense Ratio: 0.95%
  • Inception Date: March 11, 2010
  • Since Inception: 35.95%

PowerShares Dynamic Semiconductors Portfolio (PSI)

This ETF attempts to balance growth and risk as it mimics the Dynamic Semiconductors Intellidex Index. The money managers also consider whether a stock is undervalued or overvalued, and to some extent, engage in timing investments.

  • Avg. Volume: 71,496
  • Net Assets: $235.7 million
  • Yield: 0.57%
  • YTD Return: 17.76%
  • Expense Ratio: 0.63%
  • Inception Date: June 23, 2005
  • Since Inception: 9.97%

The Bottom Line

Large ETFs in the semiconductor sector have performed well in 2016. Returns are high and expenses are reasonable. All of these ETFs are easy to trade, meaning an investor is unlikely to be stuck in a position of wanting to get out but being unable to find a buyer.