I know that investing in a semiconductor ETF like SMH is a higher risk due to the concentration in just one sector. If semiconductors do bad that year, your return will take a hit. But isn't that true of any sector? However, and I must be missing something which is why I am asking, when I look at SMH year-after-after, the reward seems to outweigh the risk.
The listed inception date for SMH is December of 2011. There is data that goes further back, but maybe it had a different ticker then? Even with a few years that had drawdowns, the ETF quickly recovered the very next year. With the back test data, a $10k investment held in SMH vs that same $10k in SPY yielded vastly different end results...
SMH = $10k became $150k
SPY = $10k became $39k
...even with the draw downs factored in.
I am trying to wrap my mind around using the S&P 500 as a major core position when SMH destroys it in most years. What am I overlooking? Does anyone here have a long hold on any semiconductor ETF?
https://preview.redd.it/2ezo87b7a6gg1.jpg?width=522&format=pjpg&auto=webp&s=5c30e8896ae1f79c74e3f04b27fb0309d3fd10ca