Best semiconductor ETFs for the fourth quarter of 2020

Semiconductors are powering more devices and technological processes every day, and are used in mobile phones, automobiles, military weapons, smart technology and other fields. Exchange-traded funds (ETFs) can provide investors with extensive exposure to the semiconductor industry. There are currently 4 ETFs tracking semiconductor stocks, excluding leveraged and inverse funds and funds with assets under management (AUM) of less than US$50 million.Some of the most famous companies in the semiconductor industry include Micron Technology, Inc. (MU) and Advanced Micro Devices, Inc. (AMD). ETFs can help reduce the risks associated with individual stocks by providing access to a larger basket of subsidiaries. Measured by the benchmark S&P 500 Semiconductor Sub-industry Index, the semiconductor industry has far outperformed the overall market in the past year. The index’s 1-year tracked total return is 43.4%, compared to 18.2% for the S&P 500.

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Key points

  • The semiconductor industry has clearly outperformed the market in the past year.
  • The top ETFs based on 1-year tracking total returns are SMH, SOXX and PSI.
  • The largest holdings of these funds are TSMC, Qualcomm and Supermicro.

The best semiconductor ETF for the fourth quarter of 2020 is VanEck Vectors Semiconductor ETF (SMH). Below, we will study the top 3 best semiconductor ETFs measured by a 1-year tracking total return. All figures in this story are as of August 20, 2020.

  • 1 year tracking total return: 50.3%
  • Expense rate: 0.35%
  • Annual dividend yield: 1.24%
  • 3-month average daily volume: 3,393,689
  • Assets under management: $2.6 billion
  • Date of establishment: December 20, 2011
  • Issuing company: VanEck

SMH uses the MVIS US Listed Semiconductor 25 Index as its benchmark. The index focuses on many of the largest semiconductor companies located in developed markets and listed on US exchanges. SMH’s largest holdings include TSMC (TSM), the world’s largest semiconductor foundry; NVIDIA Corp. (NVDA), a graphics processing unit and chip manufacturer; and Intel Corporation (INTC), a semiconductor and cloud computing company.

  • 1 year tracking total return: 46.2%
  • Expense rate: 0.46%
  • Annual dividend yield: 1.03%
  • 3-month average daily volume: 752,783
  • Assets under management: US$3.5 billion
  • Date of Establishment: July 10, 2001
  • Issuing company: iShares

The ETF limits its maximum shareholding to about 8% of the total investment portfolio to ensure that the weight of approximately 125 stocks in its investment portfolio is relatively balanced. This means that SOXX tends to look for foreign and American companies, and it also balances large and small companies. Currently, SOXX’s largest holdings are Qualcomm Incorporated (QCOM), a wireless services, semiconductor, and software company; Nvidia; and Texas Instruments (TXN), a semiconductor and integrated circuit manufacturer.

  • 1 year tracking total return: 41.8%
  • Expense rate: 0.58%
  • Annual dividend yield: 0.40%
  • 3-month average daily volume: 31,448
  • Assets under management: $292.5 million
  • Date of establishment: June 23, 2005
  • Issuing company: Invesco

PSI is a multi-share fund that targets growth semiconductor stocks. The fund tracks the dynamic semiconductor Intellidex index and mainly holds small and medium-sized stocks in the United States. The ETF’s top holdings are Advanced Micro Devices, Nvidia and Qualcomm.

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