Semiconductor stocks have been thriving over the past few years, primarily because of their pivotal role in the artificial intelligence (AI) sector.
Investing in a semiconductor ETF -- like the Invesco Semiconductors ETF (PSI 3.50%) -- can be a smart way to buy into this slice of the market with some added diversification. This ETF contains 30 stocks, all of which are linked to the semiconductor sector. Investing in dozens of stocks at once can hedge against volatility, limiting risk during market downturns.
How much can you earn with a semiconductor ETF?
The Invesco Semiconductors ETF has skyrocketed over the past decade. Since December 2015, it's earned a staggering total return of 820%. For context, the S&P 500's (^GSPC 1.52%) total return in that time is around 233%.
If you had invested $100 in this ETF 10 years ago, you'd have around $920 today. By going a little bigger and investing $500 back then, you'd have around $4,600 today.
Just keep in mind that a narrow ETF like the Invesco Semiconductors ETF does carry more risk than, say, an S&P 500 ETF or similar broad market fund. While this ETF does contain 30 stocks, which adds some diversification, it's still highly targeted to one niche subsector of the market.
Higher-risk investments can sometimes lead to lucrative earnings over time, but it's crucial to take steps to protect your portfolio. Double-check that the rest of your investments are well diversified, and be prepared to keep a long-term outlook despite short-term volatility.
