Is First Trust NASDAQ-100-Technology Sector ETF (QTEC) a Strong ETF Right Now?
Designed to provide broad exposure to the Technology ETFs category of the market, the First Trust NASDAQ-100-Technology Sector ETF (QTEC) is a smart beta exchange traded fund launched on 04/19/2006.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $2.64 billion, which makes it one of the larger ETFs in the Technology ETFs. This particular fund seeks to match the performance of the NASDAQ-100 Technology Sector Index before fees and expenses.
The NASDAQ-100 Technology Sector Index is an equal-weighted index based on the securities of the NASDAQ-100 Index that are classified as technology.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.57%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.20%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For QTEC, it has heaviest allocation in the Information Technology sector --about 90.90% of the portfolio.
When you look at individual holdings, Meta Platforms Inc. (class A) (META) accounts for about 2.86% of the fund's total assets, followed by Palo Alto Networks, Inc. (PANW) and Apple Inc. (AAPL).
Its top 10 holdings account for approximately 28.16% of QTEC's total assets under management.
Performance and Risk
Year-to-date, the First Trust NASDAQ-100-Technology Sector ETF return is roughly 43.69% so far, and was up about 29.66% over the last 12 months (as of 09/14/2023). QTEC has traded between $98.17 and $157.31 in this past 52-week period.
The ETF has a beta of 1.17 and standard deviation of 31.08% for the trailing three-year period, making it a high risk choice in the space. With about 39 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust NASDAQ-100-Technology Sector ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Technology Select Sector SPDR ETF (XLK) tracks Technology Select Sector Index and the Vanguard Information Technology ETF (VGT) tracks MSCI US Investable Market Information Technology 25/50 Index. Technology Select Sector SPDR ETF has $49.82 billion in assets, Vanguard Information Technology ETF has $52.01 billion. XLK has an expense ratio of 0.10% and VGT charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.
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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First Trust NASDAQ-100-Technology Sector ETF (QTEC): ETF Research Reports
Apple Inc. (AAPL): Free Stock Analysis Report
Palo Alto Networks, Inc. (PANW): Free Stock Analysis Report
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
Vanguard Information Technology ETF (VGT): ETF Research Reports
Meta Platforms, Inc. (META): Free Stock Analysis Report