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Is Invesco Semiconductors ETF (PSI) a Strong ETF Right Now?

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The Invesco Semiconductors ETF (PSI - Free Report) was launched on 06/23/2005, and is a smart beta exchange traded fund designed to offer broad exposure to the Technology ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

PSI is managed by Invesco, and this fund has amassed over $879.71 million, which makes it one of the larger ETFs in the Technology ETFs. Before fees and expenses, this particular fund seeks to match the performance of the Dynamic Semiconductor Intellidex Index.

The Dynamic Semiconductor Intellidex Index is comprised of stocks of semiconductor companies. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.

Cost & Other Expenses

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

Annual operating expenses for this ETF are 0.57%, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 0.21%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

For PSI, it has heaviest allocation in the Information Technology sector --about 100% of the portfolio.

Looking at individual holdings, Broadcom Inc (AVGO - Free Report) accounts for about 5.95% of total assets, followed by Nvidia Corp (NVDA - Free Report) and Micron Technology Inc (MU - Free Report) .

PSI's top 10 holdings account for about 47.87% of its total assets under management.

Performance and Risk

Year-to-date, the Invesco Semiconductors ETF has added about 19.55% so far, and was up about 25.83% over the last 12 months (as of 07/22/2024). PSI has traded between $37.92 and $66.72 in this past 52-week period.

The ETF has a beta of 1.38 and standard deviation of 34.43% for the trailing three-year period, making it a high risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Semiconductors 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.

IShares Semiconductor ETF (SOXX - Free Report) tracks PHLX SOX Semiconductor Sector Index and the VanEck Semiconductor ETF (SMH - Free Report) tracks MVIS US Listed Semiconductor 25 Index. IShares Semiconductor ETF has $14.89 billion in assets, VanEck Semiconductor ETF has $22.05 billion. SOXX 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.

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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