Making its debut on 06/23/2005, smart beta exchange traded fund Invesco Dynamic Semiconductors ETF (PSI) provides investors 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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
Managed by Invesco, PSI has amassed assets over $640.92 million, making 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
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.55%.
PSI’s 12-month trailing dividend yield is 0.51%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it’s still important for investors to research a fund’s holdings.
This ETF has heaviest allocation in the Information Technology sector – about 100% of the portfolio.
Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 6.32% of total assets, followed by Broadcom Inc (AVGO) and Applied Materials Inc (AMAT).
The top 10 holdings account for about 46.99% of total assets under management.
Performance and Risk
Year-to-date, the Invesco Dynamic Semiconductors ETF has added about 33.05% so far, and is up about 37.09% over the last 12 months (as of 06/20/2023). PSI has traded between $85.66 and $134.72 in this past 52-week period.
PSI has a beta of 1.37 and standard deviation of 36.59% 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.
Invesco Dynamic 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 $8.48 billion in assets, VanEck Semiconductor ETF has $9.43 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.
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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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