Is iShares Semiconductor ETF (SOXX) a Strong ETF Right Now?

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The iShares Semiconductor ETF (SOXX) was launched on 07/10/2001, and is a smart beta exchange traded fund designed to offer broad exposure to the Technology ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

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.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

Because the fund has amassed over $13.42 billion, this makes it one of the largest ETFs in the Technology ETFs. SOXX is managed by Blackrock. This particular fund, before fees and expenses, seeks to match the performance of the PHLX SOX Semiconductor Sector Index.

The ICE Semiconductor Index measures the performance of U.S. traded securities of companies engaged in the semiconductor business.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.

The fund has a 12-month trailing dividend yield of 0.68%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Representing 100% of the portfolio, the fund has heaviest allocation to the Information Technology sector.

Taking into account individual holdings, Nvidia Corp (NVDA) accounts for about 9.74% of the fund's total assets, followed by Broadcom Inc (AVGO) and Advanced Micro Devices Inc (AMD).

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