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Is Direxion NASDAQ100 Equal Weighted Index Shares (QQQE) a Strong ETF Right Now?

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The Direxion NASDAQ100 Equal Weighted Index Shares (QQQE - Free Report) was launched on 03/21/2012, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Growth category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

Because the fund has amassed over $630.90 million, this makes it one of the average sized ETFs in the Style Box - Large Cap Growth. QQQE is managed by Direxion. QQQE seeks to match the performance of the NASDAQ-100 Equal Weighted Index before fees and expenses.

The NASDAQ-100 Equal Weighted Index consists of companies in the NASDAQ-100 Index but each of the securities is initially set at a weight of 1.00% of the Index. The NASDAQ-100 Index includes 100 of the largest non-financial securities listed on NASDAQ based on capitalization.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Annual operating expenses for QQQE are 0.35%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 4.46%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector - about 43.60% of the portfolio. Consumer Discretionary and Healthcare round out the top three.

Taking into account individual holdings, Activision Blizzard Inc (ATVI - Free Report) accounts for about 1.45% of the fund's total assets, followed by Booking Holdings Inc (BKNG - Free Report) and Marriott International -Cl A (MAR - Free Report) .

QQQE's top 10 holdings account for about 12.34% of its total assets under management.

Performance and Risk

So far this year, QQQE has lost about -13.88%, and is up roughly 5.22% in the last one year (as of 03/07/2022). During this past 52-week period, the fund has traded between $71.91 and $90.09.

The fund has a beta of 1.04 and standard deviation of 24.40% for the trailing three-year period, which makes QQQE a medium risk choice in this particular space. With about 103 holdings, it effectively diversifies company-specific risk.

Alternatives

Direxion NASDAQ100 Equal Weighted Index Shares is a reasonable option for investors seeking to outperform the Style Box - Large Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard Growth ETF (VUG - Free Report) tracks CRSP U.S. Large Cap Growth Index and the Invesco QQQ (QQQ - Free Report) tracks NASDAQ-100 Index. Vanguard Growth ETF has $75.75 billion in assets, Invesco QQQ has $177.39 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Growth.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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