Launched on 06/23/2005, the Invesco Semiconductors ETF (PSI) is a smart beta exchange traded fund offering 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.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

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 $824.33 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for PSI are 0.57%, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 0.24%.

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.

For PSI, it has heaviest allocation in the Information Technology sector --about 98.60% of the portfolio.

Looking at individual holdings, Micron Technology Inc (MU) accounts for about 6.88% of total assets, followed by Nvidia Corp (NVDA) and Qualcomm Inc (QCOM).

Its top 10 holdings account for approximately 48.84% of PSI's total assets under management.

Performance and Risk

Year-to-date, the Invesco Semiconductors ETF has gained about 17.11% so far, and is up roughly 52.83% over the last 12 months (as of 05/17/2024). PSI has traded between $37.92 and $58.46 in this past 52-week period.

The ETF has a beta of 1.42 and standard deviation of 34.07% for the trailing three-year period, making it a high risk choice in the space. With about 32 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 $13.19 billion in assets, VanEck Semiconductor ETF has $19.40 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

QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report

Micron Technology, Inc. (MU) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

VanEck Semiconductor ETF (SMH): ETF Research Reports

iShares Semiconductor ETF (SOXX): ETF Research Reports

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