Intel has also been a boon for the Market Vectors Semiconductor ETF (NYSEArca: SMH), which has popped 11.1% since March. SMH does serve as a reminder regarding the advantages and disadvantages of ETFs with large weights to a small number of stocks. For example, SMH holds 26 stocks, but Intel and Taiwan Semiconductor (NYSE: TSM) combine for almost 34% of the ETF’s weight. That is good when those stocks are rising, not so much when they are falling. [ETFs for a Semiconductor Recovery]
Investors looking to avoid that scenario should consider the SPDR S&P Semiconductor ETF (NYSEArca: XSD). XSD is an almost equal-weight play on the semiconductor group that previously enjoyed spells where it outperforms SMH and SOXX. The key difference between XSD and the others is that as an equal weight fund, XSD’s weight to small-cap chip names is far higher than those of the other ETFs. That leads to increased volatility, but the ETF is up 21% this year, so it is hard to argue with the result. [Equal Weight Chip ETF Leads The Pack]
SPDR S&P Semiconductor ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of QQQ, Apple and Google.