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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?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

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.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is sponsored by First Trust Advisors. It has amassed assets over $2.08 billion, making it one of the average sized ETFs in the Style Box - Large Cap Growth. This particular fund, before fees and expenses, 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

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.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.58%.

The fund has a 12-month trailing dividend yield of 0.69%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector - about 37.40% of the portfolio. Healthcare and Telecom round out the top three.

Taking into account individual holdings, Moderna, Inc. (MRNA - Free Report) accounts for about 1.02% of the fund's total assets, followed by Costar Group, Inc. (CSGP - Free Report) and Automatic Data Processing, Inc. (ADP - Free Report) .

Its top 10 holdings account for approximately 10.11% of QQEW's total assets under management.

Performance and Risk

The ETF has added about 5.81% so far this year and was up about 18.98% in the last one year (as of 06/24/2024). In the past 52-week period, it has traded between $97.89 and $124.21.

The fund has a beta of 1.03 and standard deviation of 21.28% 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.


First Trust NASDAQ-100 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 $132.98 billion in assets, Invesco QQQ has $288.13 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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