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Is First Trust NASDAQ100 Equal Weighted ETF (QQEW) a Strong ETF Right Now?

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The First Trust NASDAQ100 Equal Weighted ETF (QQEW - Free Report) was launched on 04/19/2006, 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?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.07 billion, making it one of the average sized ETFs in the Style Box - Large Cap Growth. Before fees and expenses, this particular fund seeks to match the performance of the NASDAQ-100 Equal Weighted Index.

The NASDAQ-100 Equal Weighted Index is the equal-weighted version of the NASDAQ-100 Index which includes 100 of the largest non-financial securities listed on NASDAQ based on market capitalization.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.57%.

The fund has a 12-month trailing dividend yield of 0.45%.

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 40.20% of the portfolio. Consumer Discretionary and Healthcare round out the top three.

When you look at individual holdings, Datadog, Inc. (class A) (DDOG - Free Report) accounts for about 1.15% of the fund's total assets, followed by Okta, Inc. (OKTA - Free Report) and Zscaler, Inc. (ZS - Free Report) .

QQEW's top 10 holdings account for about 10.79% of its total assets under management.

Performance and Risk

The ETF has lost about -19.28% so far this year and is down about -14.93% in the last one year (as of 07/22/2022). In the past 52-week period, it has traded between $84.27 and $120.91.

The ETF has a beta of 1.05 and standard deviation of 26.58% for the trailing three-year period, making it a medium risk choice in the space. With about 103 holdings, it effectively diversifies company-specific risk.


First Trust NASDAQ100 Equal Weighted ETF 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 $72.80 billion in assets, Invesco QQQ has $169.20 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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