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Should You Tap Into the Hot Semiconductors Market with PSI?

HomeShould You Tap Into the Hot Semiconductors Market with PSI?

Should You Tap Into the Hot Semiconductors Market with PSI?

Should You Tap Into the Hot Semiconductors Market with PSI?

Invesco Semiconductors ETF: A Comprehensive Overview of a Popular Technology Sector Fund

The Invesco Semiconductors ETF, launched on June 23, 2005, is a passively managed exchange-traded fund designed to provide broad exposure to the Technology - Semiconductors segment of the equity market. This sector ETF has gained popularity among institutional and retail investors due to its low costs, transparency, flexibility, and tax efficiency.

Sector ETFs: A Convenient Option for Diversified Exposure

Passively managed ETFs are an attractive choice for long-term investors seeking to gain diversified exposure to a specific sector of the market. Sector ETFs offer numerous benefits, including:

  • Low costs: Passively managed funds typically have lower fees compared to actively managed funds.
  • Transparency: Investors can easily monitor the holdings and performance of sector ETFs on a daily basis.
  • Flexibility: These funds allow investors to gain exposure to a broad group of companies within a particular sector, making them an ideal choice for those seeking low risk investments.

The Technology - Semiconductors Segment: A Key Player in the Equity Market

Technology - Semiconductors is one of the 16 broad Zacks sectors within the Zacks Industry classification. It currently ranks fifth, placing it among the top 31%. The sector has been a significant player in the equity market due to its growth potential and influence on various industries.

Index Details: How PSI Tracks the Dynamic Semiconductor Intellidex Index

The Invesco Semiconductors ETF is sponsored by Invesco and has amassed assets worth $744.02 million, making it an average-sized ETF attempting to match the performance of the Technology - Semiconductors segment of the equity market. The fund seeks to track the Dynamic Semiconductor Intellidex Index before fees and expenses.

The Dynamic Semiconductor Intellidex Index is comprised of stocks from 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: Evaluates a company's ability to generate revenue and earnings.
  • Stock valuation: Assesses the price-to-earnings ratio (P/E) and other metrics that determine stock value.
  • Investment timeliness: Considers the current market conditions and trends in the sector.
  • Risk factors: Evaluates the company's risk profile, including debt levels, financial leverage, and industry risks.

Costs: A Key Factor in Selecting the Right ETF

When selecting an ETF, cost is a crucial factor to consider. Cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same. The Invesco Semiconductors ETF has an annual operating expense of 0.56%, which is on par with most peer products in the space.

Sector Exposure and Top Holdings: A Closer Look at PSI's Portfolio

While ETFs offer diversified exposure, a deep look into a fund's holdings is essential to understand its investment strategy. The Invesco Semiconductors ETF has a heavy allocation in the Information Technology sector, accounting for approximately 97.70% of the portfolio.

Looking at individual holdings, Kla Corp (KLAC) accounts for about 5.16% of total assets, followed by Texas Instruments Inc (TXN) and Lam Research Corp (LRCX). The top 10 holdings account for approximately 46.26% of total assets under management.

Performance and Risk: A Year-End Review

The Invesco Semiconductors ETF has a beta of 1.51 and standard deviation of 36.84% for the trailing three-year period, making it a high-risk choice in the space. The fund's performance is subject to market fluctuations and other external factors that can impact its value.

In terms of returns, the Invesco Semiconductors ETF has a year-to-date return of approximately 7.09% and a 12-month trailing return of about 2.26% (as of July 21, 2025). The fund's price has traded between $39.29 and $64.98 in the past 52-week period.

Alternatives: Other ETFs to Consider

Investors seeking exposure to the Technology - Semiconductors segment may also consider other funds, including:

  • iShares Semiconductor ETF (SOXX): Tracks the PHLX SOX Semiconductor Sector Index and has an expense ratio of 0.35%.
  • VanEck Semiconductor ETF (SMH): Tracks the MVIS US Listed Semiconductor 25 Index and charges 0.35%.

Conclusion

The Invesco Semiconductors ETF is a popular choice among investors seeking broad exposure to the Technology - Semiconductors segment of the equity market. With its low costs, transparency, flexibility, and tax efficiency, this fund offers an attractive option for those looking to gain diversified exposure to a specific sector.

While it has its risks, the Invesco Semiconductors ETF is a great option for investors seeking to tap into the growth potential of the Technology - Semiconductors segment. By understanding the fund's investment strategy, costs, and performance, investors can make informed decisions about their investments in this space.