iShares PHLX Semiconductor ETF (SOXX)
144.1% 5-year return
19.5% annualized return
$1.6 billion AUM
0.46% expense ratio
SOXX is another pure play on the chip industry and its five-year track record is almost identical to Invesco’s PSI fund. Two of the big differences between them are cost and the assets under management. Another is that SOXX’s underlying PHLX SOX Semiconductor Sector Index is market-cap weighted, while PSI’s index is custom-weighted.
As for their portfolios, their overlap by weight is only 50%, according to ETF Research Center. That's surprisingly low considering their narrow focus on semiconductor companies and that SOXX has 30 holdings versus 29 for PSI.
But ETF Research Center’s analysis finds there are only 17 overlapping constituents, with the largest overweights being Texas Instruments, Qualcomm, Broadcom Inc., Micron and Intel Corp. SOXX has a greater U.S. large-cap focus (71% of weighting) versus PSI (41%). And as a market-cap weighted fund, the top five holdings in SOXX comprise nearly 40% of the fund’s portfolio, while the top five in PSI make up a little more than 26%.
iShares U.S. Medical Devices ETF (IHI)
144% 5-year return
19.5% annualized return
$3.9 billion AUM
0.42% expense ratio
This product’s focus on the U.S. medical-devices sector makes it the only non-tech fund in the group. This primarily large-cap ETF has outperformed its main competitor, the SPDR S&P Health Care Equipment ETF (XHE), which nonetheless has a solid total return of 123.7% during the past five years, or 17.5% on an annualized basis.
XHE is smaller in assets ($586 million) and expense ratio (0.35%). Both funds invest exclusively in U.S. companies, and both benefit from the strong tailwinds of an aging population demographic and longer life spans that are fueling the demand for medical devices and the healthcare sector in general.
Conclusion
It shouldn’t be a surprise that technology—and healthcare—fill the ranks of the top-five performing ETFs of the past five years. The modern economy is based on technology and that's only intensifying, while the graying of the developed world’s population creates consistent demand for healthcare services.
Of course, that doesn’t mean the five above-mentioned funds will continue to lead the way during the next five years. Chances are they won’t. But economic and societal trends indicate that technology and healthcare services on the whole will likely be profitable places to invest in coming years.