N※N

The Best Semiconductor ETF to Invest $500 in Right Now | The Motley Fool

  //stocks-investing.news-articles.net/content/202 .. -to-invest-500-in-right-now-the-motley-fool.html
  Published in Stocks and Investing on Thursday, September 18th 2025 at 8:33 GMT by The Motley Fool
          ^{🞛 This publication is a summary or evaluation of another publication 🞛 This publication contains editorial commentary or bias from the source}

The Best Semiconductor ETF to Put $500 Into Right Now

Investors who want to tap the upside of the semiconductor industry without the hassle of picking individual chip makers are looking to an exchange‑traded fund (ETF) that provides broad, diversified exposure to the sector. The Motley Fool’s recent piece, “The Best Semiconductor ETF to Invest $500 in Right,” breaks down the top contenders, the market backdrop, and why one particular ETF shines in today’s environment.

Why Semiconductors Matter

Semiconductors are the silicon‑based heart of the modern economy. From smartphones and laptops to electric vehicles and cloud data centers, every new wave of tech hinges on chips. The industry has experienced a boom fueled by the global shift toward 5G, artificial intelligence, and autonomous driving. Supply‑chain constraints, geopolitical tension between the U.S. and China, and the need for advanced manufacturing infrastructure have kept chip prices high and demand steady.

The Motley Fool explains that this sector offers a “super‑growth” opportunity for long‑term investors, but also highlights the risks—cyclical demand swings, heavy R&D spending, and the concentration of manufacturing in a handful of regions. For most retail investors, a well‑constructed ETF mitigates these idiosyncrasies while still delivering the upside of the broader semiconductor ecosystem.

The ETF Landscape

The article surveys several ETFs that track semiconductor indices, each with its own niche:

The piece stresses that “expense ratio” is a key differentiator. While all four ETFs provide robust exposure, a lower fee means more of your $500 stays invested over time. It also notes that SMH (VanEck) boasts the lowest expense ratio—just 0.20%—and has been the best performer over the last five years.

The Verdict: VanEck Vectors Semiconductor ETF (SMH)

The Motley Fool’s recommendation settles on SMH for a $500 allocation. The reasons, distilled from the article, include:

1. Low Fees – At 0.20%, SMH has the smallest drag on returns among the top four. Over a decade, a 0.5% difference can translate into thousands of dollars.
2. Strong Performance – SMH outperformed its peers by an average of 3‑5% per annum over the last five years, thanks to heavy weighting in high‑growth names like NVIDIA and ASML.
3. Broad, Yet Focused Exposure – The fund tracks the MVIS US Listed Semiconductor Index, which includes 30–40 companies covering design, manufacturing, and equipment. This balances concentration risk while keeping the sector focus tight.
4. Liquidity and Transparency – SMH trades in large volumes with a bid‑ask spread typically under 0.05%, ensuring easy entry and exit without significant cost.

The article also mentions that SMH’s top five holdings (NVIDIA, ASML, TSMC, Intel, and Qualcomm) collectively account for roughly 45% of the fund’s net assets, giving investors a clear picture of where the upside and downside lie.

Performance Snapshot

To give context, the article juxtaposes SMH’s recent track record:

The differences may seem modest, but the article cautions that the true advantage of a low‑cost ETF compounds over time, especially for a $500 investment that could double in a few years.

Risk Factors and Mitigation

The piece does not shy away from the downside. It outlines several risks inherent to semiconductor investing:

• Cyclical Demand – Chip demand fluctuates with the broader consumer electronics cycle. A sudden slowdown in smartphone sales or PC manufacturing can hit the sector hard.
• Geopolitical Tension – Trade restrictions between the U.S. and China can disrupt supply chains, as seen with the U.S. semiconductor bill of 2022.
• Capital‑Intensive R&D – Companies in the space often burn through cash on new process nodes; a misstep can erode profits.

To mitigate these risks, the article recommends diversification within the ETF itself and maintaining a long‑term horizon (at least 5‑10 years). It also suggests periodically reviewing the ETF’s holdings to ensure that the fund’s sector focus remains aligned with market trends.

How to Buy SMH with $500

The article walks readers through a practical buying plan:

1. Choose a Brokerage – Platforms like Fidelity, Charles Schwab, and Robinhood support SMH and allow fractional shares, so $500 can be fully allocated.
2. Set Up a Direct Order – For the best price, place a limit order at the current market price or a slightly higher price to ensure execution.
3. Reinvest Dividends – SMH pays quarterly dividends (around 0.7% annual yield). Opting for dividend reinvestment maximizes compounding.
4. Monitor Quarterly Statements – Keep an eye on the fund’s net asset value (NAV) and expense ratio to spot any changes.

Other ETFs Worth a Second Look

While SMH leads the pack, the article acknowledges that other ETFs can serve niche needs:

• XSD (SPDR S&P Semiconductor ETF) – Excellent for investors who want more exposure to U.S. chip makers specifically, such as NVIDIA and AMD.
• IHI (iShares Semiconductor ETF) – Slightly higher expense ratio but offers a bit more diversification into international players like TSMC.
• PSI (Invesco Dynamic Semiconductors ETF) – Aggressively weighted toward growth names, making it riskier but potentially higher‑returning for seasoned investors.

Bottom Line

The Motley Fool’s article concludes that, for a retail investor looking to stake a modest $500 in the high‑growth semiconductor space, VanEck Vectors Semiconductor ETF (SMH) offers the best blend of low cost, strong performance, and diversified exposure. Coupled with a long‑term investment mindset and a willingness to weather cyclical downturns, SMH can serve as a solid building block in a balanced portfolio.

The piece reminds readers that while ETFs provide diversification, they are not a “set‑and‑forget” solution. Continuous monitoring, periodic rebalancing, and staying informed about macro trends—such as 5G rollouts, AI adoption, and geopolitical shifts—are essential to capture the full upside of the semiconductor sector.