Should You Invest In The SPDR S&P Semiconductor ETF (XSD)?

If you're interested in broad exposure to the Technology - Semiconductors segment of the equity market, look no further than the SPDR S&P Semiconductor ETF (NYSE:XSD), a passively managed exchange traded fund launched on 01/31/2006.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Semiconductors is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.

Index Details

The fund is sponsored by State Street (NYSE:STT) Global Advisors. It has amassed assets over $345.38 M, making it one of the average sized ETFs attempting to match the performance of the Technology - Semiconductors segment of the equity market. XSD seeks to match the performance of the S&P Semiconductor Select Industry Index before fees and expenses.

The S&P Semiconductor Select Industry Index represents the Semiconductor sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Semiconductor Index is a modified equal weight index.

Costs

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 this ETF are 0.35%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.57%.

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.

This ETF has heaviest allocation in the Information Technology sector--about 100% of the portfolio.

Looking at individual holdings, Advanced Micro Devices Inc. (NASDAQ:AMD) accounts for about 3.88% of total assets, followed by Ambarella Inc. (AMBA) and Nvidia Corporation (NVDA).

The top 10 holdings account for about 34.39% of total assets under management.

Performance and Risk

The ETF has lost about -26.21% so far this year and is down about -1.51% in the last one year (as of 03/18/2020). In that past 52-week period, it has traded between $71.11 and $112.52.

The ETF has a beta of 1.39 and standard deviation of 29.80% for the trailing three-year period, making it a high risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR S&P Semiconductor ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XSD is an excellent option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

VanEck Vectors Semiconductor ETF (SMH) tracks MVIS US Listed Semiconductor 25 Index and the iShares PHLX Semiconductor ETF (SOXX) tracks PHLX SOX Semiconductor Sector Index. VanEck Vectors Semiconductor ETF has $1.51 B in assets, iShares PHLX Semiconductor ETF has $1.87 B. SMH has an expense ratio of 0.35% and SOXX charges 0.46%.

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.