Should You Invest in the iShares Semiconductor ETF (SOXX)?

Looking for broad exposure to the Technology – Semiconductors segment of the equity market? You should consider the iShares Semiconductor ETF (SOXX), a passively managed exchange traded fund launched on 07/10/2001.

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.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Technology – Semiconductors is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 5, placing it in top 31%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $6.77 billion, making it one of the largest ETFs attempting to match the performance of the Technology – Semiconductors segment of the equity market. SOXX seeks to match the performance of the PHLX SOX Semiconductor Sector Index before fees and expenses.

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

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are 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 1.14%.

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, Broadcom Inc (AVGO) accounts for about 8.92% of total assets, followed by Texas Instrument Inc (TXN) and Nvidia Corp (NVDA).

The top 10 holdings account for about 49.12% of total assets under management.

Performance and Risk

The ETF has gained about 10.53% so far this year and is down about -23.91% in the last one year (as of 01/19/2023). In that past 52-week period, it has traded between $298.68 and $504.63.

The ETF has a beta of 1.31 and standard deviation of 40.30% for the trailing three-year period, making it a high risk choice in the space. With about 35 holdings, it has more concentrated exposure than peers.

Alternatives

IShares Semiconductor ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SOXX is a great 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 VanEck Semiconductor ETF (SMH) tracks MVIS US Listed Semiconductor 25 Index. SPDR S&P Semiconductor ETF has $1.13 billion in assets, VanEck Semiconductor ETF has $7.10 billion. XSD has an expense ratio of 0.35% and SMH charges 0.35%.

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

Texas Instruments Incorporated (TXN) : 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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