Is Invesco Dynamic Semiconductors ETF (PSI) a Strong ETF Right Now?

The Invesco Dynamic Semiconductors ETF (PSI) was launched on 06/23/2005, 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?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

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.

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

The fund is managed by Invesco. PSI has been able to amass assets over $686.01 million, making it one of the average sized ETFs in the Technology ETFs. Before fees and expenses, PSI seeks to match the performance of the Dynamic Semiconductor Intellidex Index.

The 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.

Annual operating expenses for PSI are 0.57%, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 0.14%.

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 97.30% of the portfolio, the fund has heaviest allocation to the Information Technology sector.

Looking at individual holdings, Advanced Micro Devices Inc (AMD) accounts for about 5.88% of total assets, followed by Qualcomm Inc (QCOM) and Broadcom Inc (AVGO).

Its top 10 holdings account for approximately 46.05% of PSI’s total assets under management.

Performance and Risk

The ETF return is roughly 26.06% so far this year and is up about 71.61% in the last one year (as of 09/08/2021). In the past 52-week period, it has traded between $72.07 and $132.18.

The ETF has a beta of 1.28 and standard deviation of 37.29% for the trailing three-year period, making it a high risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

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.

VanEck Semiconductor ETF (SMH) tracks MVIS US Listed Semiconductor 25 Index and the iShares Semiconductor ETF (SOXX) tracks PHLX SOX Semiconductor Sector Index. VanEck Semiconductor ETF has $6.13 billion in assets, iShares Semiconductor ETF has $7.44 billion. SMH has an expense ratio of 0.35% and SOXX charges 0.43%.

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.

Bottom Line

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.

Published on September 8, 2021

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