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Is First Trust NASDAQ-100 Equal Weighted ETF (QQEW) a Strong ETF Right Now?

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Making its debut on 04/19/2006, smart beta exchange traded fund First Trust NASDAQ-100 Equal Weighted ETF (QQEW - Free Report) provides investors 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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

Because the fund has amassed over $1.33 billion, this makes it one of the average sized ETFs in the Style Box - Large Cap Growth. QQEW is managed by First Trust Advisors. This particular fund seeks to match the performance of the NASDAQ-100 Equal Weighted Index before fees and expenses.

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

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.57%, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 0.61%.

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.

For QQEW, it has heaviest allocation in the Information Technology sector --about 36.80% of the portfolio --while Consumer Discretionary and Healthcare round out the top three.

When you look at individual holdings, Warner Bros. Discovery, Inc. (WBD - Free Report) accounts for about 1.28% of the fund's total assets, followed by Mercadolibre, Inc. (MELI - Free Report) and Charter Communications, Inc. (class A) (CHTR - Free Report) .

The top 10 holdings account for about 11.6% of total assets under management.

Performance and Risk

So far this year, QQEW return is roughly 8.99%, and is down about -8.25% in the last one year (as of 03/28/2023). During this past 52-week period, the fund has traded between $81.64 and $109.85.

The fund has a beta of 1.05 and standard deviation of 24.27% for the trailing three-year period, which makes QQEW a medium risk choice in this particular space. With about 102 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust NASDAQ-100 Equal Weighted ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.

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 $78.01 billion in assets, Invesco QQQ has $168.40 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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