I don’t really know a lot about this fund and sector, and just curious what people thought of this fund…SOXX. A friend asked me about it, and about investing in general. When people ask me about ideas for investing, I normally go through core investments first before stocks. Normally, my bias is toward S&P funds and the QQQ. However, I don’t want to dismiss his interests, which center more on something covered by this fund. So just throwing this out there to the board…I looked at the past performance, seems pretty good, even compared to the S&P. Obviously none of us know the future, and the decision is his ultimately not mine, but I’m thinking of telling him to go for this one if he so choose after his own research. Decent choice?
This what you mean?
iShares Semiconductor ETF
Why invest in a single industry?
Unless it’s your area of expertise, and even then it’s probably not a good idea.
Concentrations in a single sector is generally not advisable for a rookie investor. Based on your inquiry, I would assume such about your friend.
General rule would be for no more than 10% concentration in a single sector as a retirement vehicle. If retirement asset needs have been met, then a greater concentration could be considered.
Note, you mention prior performance history but did you go back to inception? This fund did NOTHING for 10 years from 2001 through 2011. For roughly 16 years, it lagged the performance of the S&P.
This fund has done stellar recently, but your friend might have missed out on that run. P/E is 28.
Semiconductors is a growth industry. They are in short supply everywhere and more and more are being used in all sorts of products. Automobiles but also smart appliances and all sorts of electronics.
I think growth is likely to continue for decades. But companies can over build capacity and that can result in lower profits. A risk.
Half a dozens semiconductor stocks are in the news. But SOXX shows there are many more players.
I agree SOXX is too specialized for a single investment but in a diversified portfolio with an S&P 500 index fund or total market fund it can be fine.
We tried to start a SOXX discussion board a few years ago but people found the promo posts too commercial. They were pulled; it failed for lack of interest.
Today there is a shortage. That means short term there will in increased profits and that will raise stock prices. When the shortage ends, prices will go down.
Buy High & Sell Low is not a good investment plan.
My apologies, thought I had already responded to this, but looks like I had not.
I had already read the replies prior, and they were extremely helpful. What I ended up doing was focusing on the aspect that while, yes, as said here, this is essentially an important sector that should grow, it is nevertheless a concentrated sector fund that may see volatility, sometimes to the downside (volatility is okay long-term for averaging in, but not if it might mean being down for a while based on prolonged cycles). These replies helped me to remember that. Sector funds can be tough, and I was lulled by recent performance, and really didn’t think about the shortages. Perhaps this is good for a small allocation of a core portfolio. (I myself am having a rough time with a sector fund, one in health, that I probably need to reduce exposure to)
Thanks again, this really helped me to think it through…
(I myself am having a rough time with a sector fund, one in health, that I probably need to reduce exposure to)
Be careful of one of the greatest mistakes we all have made…buying high and selling low!
I don’t know what your sector fund is made up of, exactly, nor when you actually bought it, but realize that if it’s worth less that you paid for it and you sell, you have locked in your loss. If your fund is made up of blue chip companies, it’ll probably come back around. Perhaps as a starting point, compare it to the market as a whole, and other similar sector funds. If it’s not performing comparatively poorly, then think twice about selling.
If you feel that the market is making you a little crazy, don’t pay as much attention to it. If you buy quality, you’ll be ok in the long run. The ultimate key to success is continuing to put more money in, over a long period of time. Don’t sell your sector fund, buy more of it at a lower price (assuming quality, etc).