Vanguard's Leading ETF Has Gained 24% This Year. There's Another ETF That's Soared Double That Amount.
Vanguard's popularity isn't a secret, thanks to their low-cost funds and stellar performance. But let's talk about an ETF that's been stealing the show lately - the VanEck Semiconductor ETF (SMH). This fund, managed by VanEck, has been leaving Vanguard's top ETF in the dust.
So how has SMH outperformed the competition? Well, the semiconductor industry is on fire, primarily due to the surge in demand for semiconductors in AI, modern technology, and cloud services. Heavy investments in advanced chip manufacturing, addressing shortages, and meeting rising demands have contributed to this industry growth.
And let's not forget about AI and technology advancements. As technology keeps evolving, the need for sophisticated semiconductors becomes more critical, driving returns for related ETFs.
Now, let's dive into the top performers in SMH. The ETF's portfolio is dominated by heavy hitters. Nvidia, with a whopping 20.4% share, has seen shares explode 150% higher this year, thanks to demand for its graphics processing units that power AI models. Taiwan Semiconductor Manufacturing, a chipmaker supplying industry giants, has also seen a 65% year-to-date gain.
While there's a risk-averse investor might want to steer clear, aggressive investors should consider the VanEck Semiconductor ETF as an opportunity. AI will continue to provide a strong tailwind for these stocks, and the ETF's annual expense ratio of 0.35% isn't too steep, especially considering its high five-star Morningstar rating. After all, Buffett doesn't shy away from high-performing investments, right?
Of course, like all investments, SMH comes with its risks. The ETF has a history of significant dips, as seen in Q2 2022 when it plunged 24%. However, if you're game for high returns and comfortable with the risk, the VanEck Semiconductor ETF could be your next big bet.
Investors who are interested in the semiconductor industry and are willing to take on a higher level of risk might find the VanEck Semiconductor ETF (SMH) an attractive option for their portfolio, as its annual expense ratio of 0.35% is relatively low compared to other high-performing ETFs in the sector. Furthermore, with notable investments in industry heavyweights such as Nvidia and Taiwan Semiconductor Manufacturing, which have seen substantial gains this year, SMH presents an opportunity for substantial returns thanks to the growing demand for advanced semiconductors in areas like AI and modern technology.
In order to maximize returns, investors should closely monitor their investment strategies in light of this industry's volatility, as demonstrated by the ETF's significant dip in Q2 2022, and ensure they have a solid understanding of the risks involved in investing in this growth sector.