Finding Footing in Non-Financial Sectors with This Equal-Weight ETF

This article is the second in a series exploring equal-weight ETFs.

The market uncertainty and volatility can cause concern among investors, but they may want to turn to equal-weight exchange-traded funds (ETFs).

The benefit of an equal-weighted ETF, such as First Trust Nasdaq-100 Equal Weighted Index Fund (NASDAQGM: QQEW), is that it acts as a bit of a buffer against a market downturn in any one sector. Unlike a market-cap weighted ETF, wherein a specific sector or company can make up much of the fund, the companies and sectors that comprise an equal-weighted ETF such as QQEW are all favored equally, with no bearing on their market capitalization or size.

As an equal-weighted fund, QQEW may be of interest to investors looking to diversify into non-financial sectors. This fund provides equal-weighted exposure to the Nasdaq 100, which is a tech-focused index comprised of 100 of the largest domestic and international non-financial companies listed on the Nasdaq, based on market capitalization.

This fund is rebalanced quarterly to help provide equal allocation to all its components without any sector or market-capitalization favoritism. QQEW’s equal-weighted approach helps to mitigate some of the impact from the Nasdaq 100’s heavy-tech weighting. However, the index’s top holdings are led by two technology giants, Apple Inc. (NASDAQ: AAPL) and Microsoft Corp. (NASDAQ: MSFT), followed by global retailer Amazon.com Inc. (NASDAQ: AMZN).

QQEW has an expense ratio of 0.58%, a 0.12% distribution yield and $1.35 billion in assets under management. Further, it pays a quarterly dividend of $0.15. As the fund is an amalgamation of various sectors, all of equal weight, it is not surprising that it is a reflection of 2020’s market turmoil.

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However, by early November 2020, it saw a sharp spike and continued to climb through February 2021. It hit a bit of a bump in March but has remained solid overall since then. Currently, the fund is trading at the higher end of its 52-week range of $83.94 to $117.83 and opened this morning at $112.51.

Chart courtesy of Stockcharts.com

The fund’s top five holdings include Trip.com Group Ltd. Sponsored ADR (NASDAQ:TCOM), 1.09%, Marriott International, Inc. Class A (NASDAQ:MAR), 1.09%, Seagen, Inc. (NASDAQ:SGEN), 1.08%, Booking Holdings Inc. (NASDAQ:BKNG), 1.07% and NetEase, Inc. Sponsored ADR (NASDAQ:NTES), 1.06%. The fund’s equal weighting causes these holdings to differ from those of the NASDAQ 100.

Overall, the Trust Nasdaq-100 Equal Weighted Index Fund (NASDAQGM: QQEW) may be a reasonable modification to the Nasdaq 100 for investors interested in a purer exposure to the non-financial sectors with less concentration in technology. It may also be of interest for investors looking to build a long-term or retirement portfolio, as opposed to traders interested in quick liquidity.

However, this equal-weighted ETF may not be appropriate for all portfolios, and investors are encouraged to conduct their own due diligence to determine whether this fund aligns with their investing goals.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.