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Top 5 Semiconductor ETFs For 2021

Semiconductors are positioned for another big year in 2021 fueled by expectations from strong sales growth.

The tech sector was once again a top performer in 2020. Semiconductor stocks were a big reason for that as the sector returned more than 50% this year.

Semiconductors proved to be an economically resilient sector in 2020. Despite disruptions related to the COVID pandemic, semiconductor sales were up more than 5% this year. They're also forecast to increase another 8% in 2021.

If the COVID vaccine does what we hope it will and it ushers in a global economic recovery, the tech sector (and semiconductors specifically) could be poised to lead the market again.

Here are 5 top semiconductor ETFs to consider in 2021.

iShares PHLX Semiconductor ETF (SOXX)

SOXX is easily the largest semiconductor-focused ETF and one of the most broadly diversified. It invests in companies engaged in the design, distribution, manufacture and sale of semiconductors.

The fund skews heavily towards large-cap stocks and gives larger allocations to companies with greater semiconductor industry exposure.

VanEck Vectors Semiconductor ETF (SMH)

SMH also focuses on large-cap stocks, but takes a more global approach to portfolio construction. It's only got about 75% of assets dedicated to U.S. stocks.

It's also one of the more concentrated portfolios. SMH holds only about 25 names at a time.

SPDR S&P Semiconductor ETF (XSD)

XSD can invest in large-, mid- and small-cap stocks, so it tends to have more of a small company skew than the other ETFs on this list.

Another unique characteristic is the fact that the portfolio is equal-weighted, something that none of the other funds on this list does.

Invesco Dynamic Semiconductors ETF (PSI)

PSI doesn't aim to provide a broad semiconductor stock portfolio. It tries to identify the best. It evaluates companies based on a variety of criteria, including price momentum, earnings momentum, quality, management action and value.

The fund is also fairly concentrated by investing in just 30 U.S. companies.

First Trust Nasdaq Semiconductor ETF (FTXL)

FTXL takes a similar approach by focus on quality. It targets the 30 most liquid stocks from the sector and then examines their 12-month price volatility, cash flow to price and recent growth rates.

The securities are then weighted according to their combined metric scores with top scores earning greater weights.