The Fidelity Tech ETF Offers Lower Fees Broader Reach Than the iShares SOXX

Fidelity MSCI Information Technology Index ETF (FTEC +2.69%) offers low-cost, broad tech exposure, while iShares Semiconductor ETF (SOXX +5.67%) targets a concentrated, high-volatility bet on the semiconductor industry.

Investors seeking exposure to the technology sector often choose between broad market funds and specialized industry vehicles. The choice between a diversified information technology fund and a concentrated semiconductor fund involves weighing lower costs and broader reach against the potential for higher volatility and significant industry-specific returns.

Snapshot (cost & size)

The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Fidelity fund offers a significantly lower expense ratio of 0.08% compared to the 0.34% charged by the iShares ETF. While both funds focus on growth, the Fidelity fund provides a slightly higher trailing-12-month distribution yield for income-seeking investors.

Performance & risk comparison

What’s inside

The Fidelity MSCI Information Technology Index ETF (FTEC +2.69%) provides exposure to a broad range of technology companies by tracking the MSCI USA IMI Information Technology 25/50 Index. Its portfolio consists of 286 holdings, with its largest positions including Nvidia Corp (NVDA +1.73%) at 18.8%, Apple Inc (AAPL +2.08%) at 14.29%, and Microsoft Corp (MSFT 1.33%) at 9.91%. This Fidelity fund launched in 2013, reports no structural quirks, and paid $0.95 per share in dividends over the trailing 12 months.

In contrast, the iShares Semiconductor ETF (SOXX +5.67%) maintains a much tighter focus on the semiconductor industry, tracking a specialized index of U.S.-listed equities in that sector. Its portfolio holds 30 companies, and its largest positions include Micron Technology Inc (MU +15.40%) at 9.03%, Broadcom Inc (AVGO +4.27%) at 7.78%, and Advanced Micro Devices Inc (AMD +11.44%) at 7.70%. The fund is 100.00% concentrated in the technology sector. This iShares fund launched in 2001, reports no structural quirks, and has a trailing-12-month dividend of $1.67 per share.

For more guidance on ETF investing, check out the full guide at this link.

What it means for investors

If you want exposure to the 30 largest U.S.-listed semiconductor companies, the SOXX ETF from iShares is hard to beat. By tracking only semiconductors, it’s been a big winner in the AI revolution. The ETF is up by 73% this year.

If semiconductor-specific exposure isn’t your goal, or you’re just plain nervous about the sustainability of semiconductor demand, Fidelity’s FTEC ETF seems like a better option.

In addition to a slightly higher dividend yield, FTEC offers a significantly lower expense ratio and a diversified approach for adjusting to industry cycles. This could come in handy if demand for semiconductors stalls.

If you’re not comfortable with all the volatility that comes with a narrow focus on semiconductors, FTEC looks like the right choice.