Is Invesco Semiconductors ETF (PSI) a Strong ETF Right Now?
The Invesco Semiconductors ETF (PSI) made its debut on 06/23/2005, and is a smart beta exchange traded fund that provides broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by Invesco, PSI has amassed assets over $681.17 million, making it one of the larger ETFs in the Technology ETFs. Before fees and expenses, PSI 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.
Operating expenses on an annual basis are 0.55% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.52%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
PSI's heaviest allocation is in the Information Technology sector, which is about 97.90% of the portfolio.
Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 6.74% of total assets, followed by Broadcom Inc (AVGO) and Applied Materials Inc (AMAT).
The top 10 holdings account for about 47.77% of total assets under management.
Performance and Risk
The ETF return is roughly 40.89% so far this year and it's up approximately 43.37% in the last one year (as of 09/05/2023). In the past 52-week period, it has traded between $28.55 and $48.19.
The ETF has a beta of 1.38 and standard deviation of 36.34% 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) tracks PHLX SOX Semiconductor Sector Index and the VanEck Semiconductor ETF (SMH) tracks MVIS US Listed Semiconductor 25 Index. IShares Semiconductor ETF has $9.22 billion in assets, VanEck Semiconductor ETF has $10.21 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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Invesco Semiconductors ETF (PSI): ETF Research Reports
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Applied Materials, Inc. (AMAT) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
VanEck Semiconductor ETF (SMH): ETF Research Reports
iShares Semiconductor ETF (SOXX): ETF Research Reports
