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Which ETF Is Right for You? SOXX vs. SMH Comparison for 2023

which etf is right for you soxx vs smh comparison for 2023

With ETFs becoming increasingly popular as an investment option, it can be difficult to decide which one is best for your portfolio. With so many available options, choosing the right ETF for you can feel like a daunting task. However, by arming yourself with knowledge about key features and characteristics of different ETFs present in the market, you can make an informed decision when considering investing in them. In this post, we closely examine two major semiconductor exchange-traded funds (ETF) – SOXX vs. SMH – and compare their features to help you decide which is better for you.

Overview of SOXX and SMH:

Before moving into the comparison, we should take a look at those two ETFs.

What Is SOXX?

SOXX is an ETF (Exchange Traded Fund) that follows the performance of the PHLX Semiconductor Sector Index; it holds various semiconductor stocks listed on U.S. exchanges and aims to mirror the price and return rate of its benchmark index. Investing in this fund can give investors access to a diversified portfolio, allowing them to gain broad exposure to their chosen sector without having too much money tied into one company or stock pick.

Investors and analysts worldwide carefully observe the PHLX SOX Semiconductor Sector Index, a comprehensive benchmark of companies associated with designing, manufacturing, and selling semiconductors and related products. The index’s performance is weighted by market capitalization accordingly so that larger corporations have an amplified influence. This makes it the go-to indicator for tracking progress within the semiconductor domain.

which etf is right for you soxx vs smh comparison for 2023 2

What Is SMH?

SMH, or the VanEck Vectors Semiconductor ETF, is an exchange-traded fund that endeavors to mirror the MVIS US Listed Semiconductor 25 Index. This ETF possesses a wide arsenal of semiconductor stocks listed on U.S exchanges and will generally follow suit with its performance regarding both price and yield.

The MVIS US Listed Semiconductor 25 Index tracks the performance of the largest 25 U.S.-listed companies that manufacture semiconductors and associated equipment, with significant weight given to those boasting large market capitalizations for maximum impactful results.

SOXX vs. SMH: Which Is Better For You?

Here’s a comparison of SOXX and SMH:

  1. Index Tracked: SOXX follows the PHLX Semiconductor Sector Index and comprises around 35 United States semiconductor corporations. SMH, however, tracks the MVIS US Listed Semiconductor 25 Index, comprising only the largest 25 U.S-listed semiconductors.
  2. Portfolio Composition: While SOXX and SMH share similar portfolio holdings, there are distinct differences. Firstly, SOXX has a broader range of investments with a higher number of holdings across the semiconductor industry, whereas SMH owns a more concentrated pool that its top five companies dominate.
  3. Expense Ratio: Both ETFs have the same expense ratio of 0.35%.
  4. Performance: Both ETFs have demonstrated impressive returns over the years, yet their performances in certain periods contrast. For instance, SOXX came out on top in earlier years, while SMH led the 2020’s race.
  5. AUM: The SOXX ETF is colossal, managing a whopping $7.5 billion in assets compared to SMH’s relatively smaller AUM of roughly $7.6 billion.

When selecting between SOXX and SMH, investors should contemplate the variations in their portfolio composition, expense ratio, and performance. Having said that, conducting your own research and consulting a financial advisor to discover which ETF is right for you based on your investment goals and risk tolerance is essential.

Final Verdict:

Ultimately, investors can invest in either SOXX or SMH to get exposure to the semiconductor industry. In choosing between them, we must evaluate several aspects, such as portfolio composition and expense ratios, amongst other metrics like performance and AUM. While SOXX offers a more diversified selection of securities from this sector, SMH presents itself with a focused list of 25 leading U.S.-listed companies while being cheaper on fee structures. Nevertheless, SOXX has a larger overall fund size than its counterpart, which could be an additional point for consideration when making your decision here. 

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