The Invesco QQQ (QQQ), and its lower-cost sibling Invesco NASDAQ 100 ETF (QQQM), soared 40% year-to-date as of September 7, more than double that of the broad S&P 500 Index based ETFs in 2023. While there are lots of reasons to celebrate the growth stocks inside the NASDAQ 100 index, some advisors might be looking for alternatives to the market-cap weighted index ETFs that reduce their risk profile. Thankfully there are some choices to consider.
A NASDAQ 100 ETF That Loves its Children Equally
The Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE) holds the same stocks of the 100 large-cap companies found in QQQ and QQQM but in different proportions. For example, Apple and Microsoft recently represent 12% and 10% of QQQ and QQQM assets respectively. However, these companies were only approximately 1% of assets in QQQE.
Meanwhile, more moderately sized companies like Baker Hughes, Charter Communications, and Intuit had slightly higher weightings in QQQE due to recent price appreciation since the quarterly rebalance. Yes, there are energy stocks within the NASDAQ-100 Index. It is not just a collection of innovative information technology and communications services companies.
The more diversified approach might appeal to advisors concerned about the risks of a large stakes in a handful of companies. QQQE has a 0.35% expense ratio, higher than QQQ (0.20%) and QQQM (0.15%) and had risen 22% in value thus far in 2023.