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Should First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) Be on Your Investing Radar?

Sweta Killa
Tilly's (TLYS) closed the most recent trading day at $16.18, moving -0.98% from the previous trading session.

The First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) was launched on 04/19/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Large Cap Growth segment of the US equity market.

The fund is sponsored by First Trust Advisors. It has amassed assets over $547.47 M, making it one of the average sized ETFs attempting to match the Large Cap Growth segment of the US equity market.

Why Large Cap Growth

Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.

Costs

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

Annual operating expenses for this ETF are 0.60%, putting it on par with most peer products in the space.

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

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 42% of the portfolio. Consumer Discretionary and Healthcare round out the top three.

Looking at individual holdings, Shire Plc (adr) (SHPG) accounts for about 1.24% of total assets, followed by Ulta Beauty, Inc. (ULTA) and Henry Schein, Inc. (HSIC).

The top 10 holdings account for about 11.49% of total assets under management.

Performance and Risk

QQEW 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.

The ETF has added roughly 3.91% so far this year and was up about 15.99% in the last one year (as of 05/18/2018). In the past 52-week period, it has traded between $52.79 and $63.23.

The ETF has a beta of 1.14 and standard deviation of 15.67% 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.

Alternatives

First Trust NASDAQ-100 Equal Weighted Index Fund carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, QQEW is a good option for those seeking exposure to the Large Cap ETFs area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 1000 Growth ETF (IWF) and the PowerShares QQQ (QQQ) track a similar index. While iShares Russell 1000 Growth ETF has $41.55 B in assets, PowerShares QQQ has $62.48 B. IWF has an expense ratio of 0.20% and QQQ charges 0.20%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

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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NASDAQ-100 SHRS (QQQ): ETF Research Reports
 
ISHARS-RS 1K GR (IWF): ETF Research Reports
 
FIRST N-100 EQW (QQEW): ETF Research Reports
 
Shire plc (SHPG) : Free Stock Analysis Report
 
Henry Schein, Inc. (HSIC) : Free Stock Analysis Report
 
Ulta Beauty Inc. (ULTA) : Free Stock Analysis Report
 
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