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Is Direxion NASDAQ100 Equal Weighted Index Shares (QQQE) a Strong ETF Right Now?
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Making its debut on 03/21/2012, smart beta exchange traded fund Direxion NASDAQ100 Equal Weighted Index Shares (QQQE - Free Report) provides investors broad exposure to the Style Box - Large Cap Growth category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
QQQE is managed by Direxion, and this fund has amassed over $581.11 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Growth. QQQE, before fees and expenses, seeks to match the performance of the NASDAQ-100 Equal Weighted Index.
The NASDAQ-100 Equal Weighted Index consists of companies in the NASDAQ-100 Index but each of the securities is initially set at a weight of 1.00% of the Index. The NASDAQ-100 Index includes 100 of the largest non-financial securities listed on NASDAQ based on capitalization.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.35%.
It has a 12-month trailing dividend yield of 4.89%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 42.40% of the portfolio. Consumer Discretionary and Healthcare round out the top three.
Taking into account individual holdings, Pinduoduo Inc-Adr (PDD - Free Report) accounts for about 1.16% of the fund's total assets, followed by Tesla Inc (TSLA - Free Report) and Splunk Inc .
Its top 10 holdings account for approximately 10.64% of QQQE's total assets under management.
Performance and Risk
So far this year, QQQE has lost about -21.01%, and is down about -9.86% in the last one year (as of 05/09/2022). During this past 52-week period, the fund has traded between $67.18 and $90.09.
The ETF has a beta of 1.05 and standard deviation of 25.48% 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
Direxion NASDAQ100 Equal Weighted Index Shares 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 $71.17 billion in assets, Invesco QQQ has $167.07 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 Direxion NASDAQ100 Equal Weighted Index Shares (QQQE) a Strong ETF Right Now?
Making its debut on 03/21/2012, smart beta exchange traded fund Direxion NASDAQ100 Equal Weighted Index Shares (QQQE - Free Report) provides investors broad exposure to the Style Box - Large Cap Growth category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
QQQE is managed by Direxion, and this fund has amassed over $581.11 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Growth. QQQE, before fees and expenses, seeks to match the performance of the NASDAQ-100 Equal Weighted Index.
The NASDAQ-100 Equal Weighted Index consists of companies in the NASDAQ-100 Index but each of the securities is initially set at a weight of 1.00% of the Index. The NASDAQ-100 Index includes 100 of the largest non-financial securities listed on NASDAQ based on capitalization.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.35%.
It has a 12-month trailing dividend yield of 4.89%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 42.40% of the portfolio. Consumer Discretionary and Healthcare round out the top three.
Taking into account individual holdings, Pinduoduo Inc-Adr (PDD - Free Report) accounts for about 1.16% of the fund's total assets, followed by Tesla Inc (TSLA - Free Report) and Splunk Inc .
Its top 10 holdings account for approximately 10.64% of QQQE's total assets under management.
Performance and Risk
So far this year, QQQE has lost about -21.01%, and is down about -9.86% in the last one year (as of 05/09/2022). During this past 52-week period, the fund has traded between $67.18 and $90.09.
The ETF has a beta of 1.05 and standard deviation of 25.48% 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
Direxion NASDAQ100 Equal Weighted Index Shares 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 $71.17 billion in assets, Invesco QQQ has $167.07 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.