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Top 6 Semiconductor ETFs For 2022

The semiconductor sector has averaged an annualized 25-30% return over the past decade.

Semiconductor stocks were among the best performers in 2021. Thanks to a global supply chain disruption that spiked the demand for chips that go into everything from phones to vehicles, the sector bucked the trend of what should have been an economically challenging situation and turned it into something positive.

Semiconductor stocks have been fantastic performers for years. The 10-year average annual return for this sector has been 25-30%, depending on the ETF or how you're investing. Investors expecting those kind of returns over the next decade should probably tap the brakes since this group is looking quite expensive, while the Fed tightening cycle, easing supply chains and slowing global growth could all work against this group in 2022.

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Semiconductors are still a fast growing and continuously evolving sector, so they make sense in the growth portion of many portfolios. If the global economy can continue growing without any major disruptions, there is room for semiconductor to deliver further gains in the coming year.

Here are 6 semiconductor ETFs to consider in 2022.

VanEck Semiconductor ETF (SMH)

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SMH is one of the largest and most concentrated semiconductor stock portfolios available. It tracks an index that includes just 25 stocks and has nearly 60% of assets in the top 10 holdings. It's makret cap weighted and therefore skews heavily towards large-cap names, including Taiwan Semiconductor and Nvidia, which alone account for 20% of the portfolio. If you're looking for concentrated semiconductor exposure, this may be the ETF for you.

iShares Semiconductor ETF (SOXX)

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SOXX is the largest of the semiconductor ETFs and probably the one most synonymous with the sector. Similar to SMH, it's skewed heavily towards large-cap U.S. companies, but implements a modified market cap weighting methodology that aims to spread out some of the concentration and idiosyncratic risk.

SPDR S&P Semiconductor ETF (XSD)

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If you're looking for a little more diversified semiconductor exposure, XSD might be your choice because it's the only equal-weighted fund on this list. That means it not only stays aways from the 9-10% weightings that some funds have, but it happens to skew a little more towards mid-caps and small-caps than its peers.

Invesco Dynamic Semiconductors ETF (PSI)

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At a high level, PSI may look like other semiconductor ETFs in terms of concentration and asset allocation, but it actually builds it's portfolio a little differently. Instead of taking a simple cap-weighting approach it tilts towards companies with comparatively more attractive momentum factors, valuations and balance sheet health.

Invesco PHLX Semiconductor ETF (SOXQ)

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SOXQ is the newest ETF on this list having just launched this past summer. It tracks the popular PHLX Semiconductor index, which means that it's largely composed of the biggest names in the sector. It has a bit of a heavier weighting towards international and emerging markets stocks, but it's still mostly U.S. large-cap exposure.

First Trust Nasdaq Semiconductor ETF (FTXL)

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FTXL happens to be the smallest ETF on this list, but it does emphasize security selection perhaps more than any of its peers. It also uses a tilted approach that emphasizes companies with attractive valuations, growth characteristics and risk mitigation.

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