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Is First Trust NASDAQ100 Equal Weighted ETF (QQEW) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust NASDAQ100 Equal Weighted ETF (QQEW - Free Report) debuted on 04/19/2006, and offers 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
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
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.08 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
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 QQEW are 0.57%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.48%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 43.30% of the portfolio, the fund has heaviest allocation to the Information Technology sector; 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) .
The top 10 holdings account for about 10.79% of total assets under management.
Performance and Risk
Year-to-date, the First Trust NASDAQ100 Equal Weighted ETF has lost about -24.21% so far, and is down about -20.82% over the last 12 months (as of 09/21/2022). QQEW has traded between $84.27 and $120.91 in this past 52-week period.
QQEW has a beta of 1.05 and standard deviation of 26.89% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 103 holdings, it effectively diversifies company-specific risk.
Alternatives
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 $71.87 billion in assets, Invesco QQQ has $157.63 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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Is First Trust NASDAQ100 Equal Weighted ETF (QQEW) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust NASDAQ100 Equal Weighted ETF (QQEW - Free Report) debuted on 04/19/2006, and offers 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
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
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.08 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
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 QQEW are 0.57%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.48%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 43.30% of the portfolio, the fund has heaviest allocation to the Information Technology sector; 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) .
The top 10 holdings account for about 10.79% of total assets under management.
Performance and Risk
Year-to-date, the First Trust NASDAQ100 Equal Weighted ETF has lost about -24.21% so far, and is down about -20.82% over the last 12 months (as of 09/21/2022). QQEW has traded between $84.27 and $120.91 in this past 52-week period.
QQEW has a beta of 1.05 and standard deviation of 26.89% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 103 holdings, it effectively diversifies company-specific risk.
Alternatives
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 $71.87 billion in assets, Invesco QQQ has $157.63 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.