The investment that we believe will be the best investment of the next decade is $Semiconductor Bull 3X Shares(SOXL)$. The goal of the ETF is to seek a return of 300% of the benchmark index of the ICE Semiconductor Index each day. For example, if the ICE Semiconductor Index is up 3% today, then SOXL will be up 9% and vice versa. However, the long-term returns will not be 300% of the ICE Semiconductor Index, it will depend on the variance of the SOXL. In this article I try to make the case that SOXL could grow at 10% per year for the next 10 years.
Why SOXL?
Growth in semiconductors
The current semiconductor market size is about 600 billion in 2021 and is projected to become a 1 trillion dollar industry by 2030, growing at 6% to 8% annually.
In addition, 70% of the 400 billion growth is contributed by computing and data storage, wireless communication, and automotive electronics. Computing and data storage is fueled by demand servers to support AI and cloud computing, the wireless segment is fueled by a shift from low-tier to mid-tier segments in emerging markets and growth in 5G, and finally automotive is fueled by autonomous driving and e-mobility.
Semi Industry will double over the next 8 years. This provides tremendous opportunity for the leaders in this industry.
Moat and competition: With SOXL you are betting on the whole sector
The reason for choosing an ETF instead of a stock is simple. You are not betting on a singular company to perform, instead, you diversified your position and are betting on the whole sector instead.
Also please note that SOXL must be part of a well diversified portfolio. Buying an ETF simply in semi conductor is not diversification.
Leverage: Double edge sword
Leverage is truly a double edge sword. It is amazing on the way up, and on the way down, it is a mountain to climb up. Leveraged ETFs such as SOXL are also tricky and not great investment vehicles during bad times. Due to inherit risk of leverage, you can wipe out years of gains by just a few months of drops. For this very reason, leveraged products are not ideal to be held long term. In my pricing model, I took into account major variance and came up with a range of $23 to $185 by year 2030. with a current price of $13.71, that shows an implied return of 67% over the next 8 years.
SOXL simulated price return
SOXL is a great investment for years to come as every industry becomes dependent on electronics. If you have the time horizon and are not afraid of drawdowns, SOXL could provide additional return to a well diversified portfolio.
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