A smart beta exchange traded fund, the Invesco Semiconductors ETF (PSI) debuted on 06/23/2005, and offers broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $584.02 million, which makes it one of the average sized 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for PSI are 0.56%, which makes it on par with most peer products in the space.
PSI's 12-month trailing dividend yield is 0.19%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, 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 100% of the portfolio.
When you look at individual holdings, Broadcom Inc (AVGO) accounts for about 6.27% of the fund's total assets, followed by Lam Research Corp (LRCX) and Analog Devices Inc (ADI).
PSI's top 10 holdings account for about 50.22% of its total assets under management.
Performance and Risk
So far this year, PSI has lost about -17.67%, and is down about -15.35% in the last one year (as of 03/31/2025). During this past 52-week period, the fund has traded between $47.68 and $66.72.
PSI has a beta of 1.40 and standard deviation of 35.73% for the trailing three-year period, which makes the fund 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 $10.77 billion in assets, VanEck Semiconductor ETF has $19.45 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 Analog Devices, Inc. (ADI): Free Stock Analysis Report Lam Research Corporation (LRCX): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis Report VanEck Semiconductor ETF (SMH): ETF Research Reports iShares Semiconductor ETF (SOXX): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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