Semiconductor ETFs have recently been durable performers as semiconductor stocks are rebounding to steady the broader technology sector, but that does not mean the gains are over for this suddenly hot group. However, valuations are rising for chip stocks.
Even with asset-gathering and performance success of select AlphaDEX ETFs, investors should realize that there is no such thing as a free lunch on Wall Street. Said differently, not every AlphaDEX ETF is guaranteed to be a better replacement for its cap-weighted counterpart.
Still, FXL’s ascent this year is arguably stunning when considering it is large-cap technology stocks leading the sector higher and this ETF’s 77 holdings have a median market value of $12.2 billion. Additionally, Apple, Microsoft and Alphabet Inc. (NASDAQ: GOOG) are not among FXL’s top 10 holdings and those are three of this year’s best-performing mega-cap tech names.
While there are periods when FXL outperforms cap-weighted technology strategies, the ETF trails the cap-weighted S&P 500 Information Technology Index over the past five years though volatility between the ETF and that index are comparable.
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Tom Lydon’s clients own shares of Apple.