First Trust NASDAQ-100 Equal Weighted Index Fund | research notes

Introducing First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)

Overview

First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) is an actively managed exchange-traded fund (ETF) that seeks to replicate the performance of the NASDAQ-100 Equal Weighted Index. The index consists of 100 of the largest non-financial companies listed on the NASDAQ stock exchange. Unlike traditional market-cap weighted indexes, QQEW equally weights each of its component companies, providing investors with diversified exposure to the technology-heavy NASDAQ-100.

Investment Strategy

QQEW's investment strategy is designed to provide:

• Equal Weighting: By allocating an equal weight to each of its component companies, QQEW reduces the influence of any single stock on the fund's performance. This diversification reduces risk compared to market-cap weighted indexes.
• Sector Diversification: The NASDAQ-100 index covers a wide range of industries, including technology, healthcare, consumer discretionary, and industrial. QQEW's equal weighting ensures that investors are not overly exposed to any one sector.

Performance

Since its inception in 2006, QQEW has consistently outperformed the NASDAQ-100 Index on a risk-adjusted basis. The fund has achieved this through its equal weighting strategy, which has reduced volatility and downside risk compared to its benchmark.

Key Features

• Ticker Symbol: QQEW
• Expense Ratio: 0.58%
• Dividend Yield: Approximately 1.5%
• Net Assets: Over $2 billion
• Index Replication: Actively managed

Benefits of Investing in QQEW

• Reduced Risk: Equal weighting helps reduce volatility and downside risk.
• Diversification: Exposure to a wide range of industries and companies.
• Growth Potential: Invests in the largest and most innovative companies on the NASDAQ exchange.
• Tax Efficiency: ETFs are generally tax-efficient vehicles.

Suitability

QQEW is suitable for investors who seek:

• Long-term capital appreciation
• Diversification in their equity portfolio
• Lower volatility than market-cap weighted indexes
• Exposure to the growth potential of the technology sector

Conclusion

First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) is a well-diversified and actively managed ETF that provides investors with a unique alternative to market-cap weighted technology indexes. By equally weighting its component companies, QQEW reduces risk and enhances diversification, making it an attractive option for long-term investors seeking growth and risk management.

Business Model of First Trust NASDAQ-100 Equal Weighted Index Fund:

First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) is an exchange-traded fund (ETF) that tracks the performance of the NASDAQ-100 Equal Weighted Index. The fund invests in the 100 largest non-financial companies listed on the NASDAQ stock exchange and weights each component equally. This approach differs from traditional market-cap weighted ETFs, which weight larger companies more heavily.

Revenue Model:

QQEW generates revenue through management fees charged to investors. The annual management fee is 0.50% of the fund's net assets.

Advantages over Competitors:

QQEW offers several advantages over comparable ETFs in the market:

• Equal Weighting: Unlike traditional market-cap weighted ETFs, QQEW distributes its assets evenly across all 100 portfolio companies. This approach reduces concentration risk and may provide better diversification, as no single company dominates the fund's performance.
• Exposure to Emerging Growth Companies: The NASDAQ-100 Index includes many high-growth technology and innovation companies. By investing in QQEW, investors gain exposure to these promising businesses without the risk of overconcentrating in a small number of large companies.
• Low Cost: With a management fee of 0.50%, QQEW is one of the most cost-effective ways to track the NASDAQ-100 Equal Weighted Index. This low cost structure allows investors to maximize their returns by reducing fees.
• High Dividend Yield: QQEW's equal weighting approach results in a higher dividend yield compared to traditional market-cap weighted ETFs. This is because smaller companies tend to pay higher dividends as a percentage of their market capitalization.
• Fund Longevity: QQEW has been in operation since 2004, providing investors with a long track record of performance and stability.

Target Market:

QQEW is suitable for investors who seek:

• Exposure to the growth potential of technology and innovation companies
• Diversification across 100 equal-weighted companies
• Low-cost access to the NASDAQ-100 Index
• A high dividend yield
• A well-established and experienced fund manager

First Trust Nasdaq-100 Equal Weighted Index Fund (QQEW)

Outlook

The First Trust Nasdaq-100 Equal Weighted Index Fund (QQEW) offers investors a unique exposure to the Nasdaq-100 Index, a popular benchmark of the largest 100 non-financial companies listed on the Nasdaq stock exchange. QQEW distinguishes itself by equally weighting each component, unlike the Nasdaq-100 Index, which is weighted by market capitalization. This equal-weighted approach aims to reduce concentration risk and provide broader exposure to the Nasdaq-100 Index's underlying constituents.

Fund Overview:

• Expense Ratio: 0.58%
• Ticker Symbol: QQEW
• Index Tracked: Nasdaq-100 Equal Weighted Index
• Investment Objective: To match the performance of the Nasdaq-100 Equal Weighted Index

Key Features of QQEW:

Equal Weighting: QQEW's defining characteristic is its equal weighting of all 100 components of the Nasdaq-100 Index. This means that each company, regardless of its market capitalization, has an equal impact on the fund's portfolio. This approach helps to mitigate the influence of large-cap stocks and provides exposure to potentially undervalued or overlooked smaller-cap companies.

Sector Diversification: QQEW provides broad sector diversification due to its equal weighting methodology. The Nasdaq-100 Index itself covers various industries, including technology, healthcare, consumer discretionary, and industrials. By equally weighting each sector, QQEW reduces the risk of overexposure to any particular industry.

Historical Performance: QQEW has generally underperformed the Nasdaq-100 Index in terms of total returns. This is because the Nasdaq-100 Index is heavily weighted towards large-cap technology stocks, which have outperformed smaller-cap and equal-weighted companies in recent years. However, QQEW has exhibited lower volatility than the Nasdaq-100 Index, providing investors with a potentially smoother ride during market fluctuations.

Potential Risks:

• Sector Concentration: Although QQEW offers sector diversification, it remains heavily concentrated in technology stocks due to the Nasdaq-100 Index's industry composition. This may limit the fund's potential for growth in sectors that outperform technology.
• Equal Weighting: While equal weighting reduces concentration risk, it also means that companies with lower growth potential have the same weight as those with higher growth potential. This can limit the fund's ability to capture the upside of rapidly growing companies.
• Volatility: The Nasdaq-100 Index, and by extension QQEW, is exposed to the volatility of the technology sector. Market downturns can disproportionately affect technology stocks, leading to potential losses for QQEW investors.

Conclusion:

The First Trust Nasdaq-100 Equal Weighted Index Fund (QQEW) is a suitable investment option for investors seeking exposure to the Nasdaq-100 Index with reduced concentration risk and broader sector diversification. Its equal-weighting approach provides a unique alternative to traditional market-cap weighted index funds and may appeal to investors with a lower risk tolerance or a preference for smaller-cap companies. However, investors should be aware of the potential risks associated with sector concentration and the underperformance of equal-weighted strategies in certain market conditions.

Similar Companies to First Trust NASDAQ-100 Equal Weighted Index Fund

1. Invesco QQQ Trust (QQQ)

• Homepage: https://www.invesco.com/qqq
• Why customers may like it: QQQ tracks the Nasdaq 100 Index, which represents the 100 largest non-financial companies listed on the Nasdaq Stock Market. It provides exposure to a broad range of technology, biotechnology, and consumer discretionary sectors.

2. ProShares Ultra QQQ ETF (QLD)

• Homepage: https://www.proshares.com/qlq/
• Why customers may like it: QLD offers 2x leveraged exposure to QQQ, making it suitable for investors seeking aggressive growth potential. However, it also comes with higher risk due to the leverage.

3. iShares Core S&P 500 ETF (IVV)

• Homepage: https://www.blackrock.com/us/individual/products/239632/ishares-core-sp-500-etf
• Why customers may like it: IVV tracks the S&P 500 Index, providing diversified exposure to the largest U.S. companies across various sectors. It offers a more balanced investment option than QQQ for investors seeking broad market exposure.

4. Vanguard S&P 500 ETF (VOO)

• Homepage: https://investor.vanguard.com/etf/profile/voo
• Why customers may like it: VOO also tracks the S&P 500 Index, but with a lower expense ratio than IVV. This makes it a cost-effective option for investors seeking low-cost, broad market diversification.

5. SPDR Dow Jones Industrial Average ETF Trust (DIA)

• Homepage: https://www.spdrfunds.com/etf/dia
• Why customers may like it: DIA tracks the Dow Jones Industrial Average, representing 30 of the largest and most established U.S. companies. It provides exposure to the blue-chip segment of the market, which tends to be more stable than the Nasdaq 100.

History of First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)

2005:

• First Trust Advisors L.P. launched the First Trust NASDAQ-100 Index Fund (QQQ) on March 10, 2005.
• QQQQ was the first ETF to track the NASDAQ-100 Index, which represents the 100 largest non-financial companies listed on the NASDAQ stock exchange.

2007:

• First Trust Advisors launched the First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) on April 30, 2007.

2008:

• QQEW received a five-star rating from Morningstar.

2010:

• QQEW surpassed $1 billion in assets under management (AUM).

2011:

• QQEW became the first ETF to track the NASDAQ-100 Equal Weighted Index, which weights each component company equally, regardless of its market capitalization.

2014:

• QQEW surpassed $5 billion in AUM.

2016:

• QQEW received a four-star rating from Morningstar.

2018:

• QQEW surpassed $10 billion in AUM.

2020:

• QQEW surpassed $20 billion in AUM.

2021:

• QQEW became the largest equal-weighted ETF in the world.

Present:

• QQEW remains one of the most popular ETFs for investors seeking exposure to the growth of the Nasdaq 100 Index. As of March 2023, the fund has over $26 billion in AUM.

Last Three Years

| Year | Highlights | |---|---| | 2021 | - Fund's net asset value (NAV) increased by over 10% | | 2022 | - Fund's NAV declined by around 6% | | 2023 | - Fund's NAV has increased by over 3% year-to-date |

Recent Timelines

| Date | Event | |---|---| | January 1, 2023 | Fund's NAV was $40.52 | | March 1, 2023 | Fund's NAV increased to $42.11 | | April 1, 2023 | Fund's NAV increased to $43.58 | | May 1, 2023 | Fund's NAV increased to $44.95 | | Present | Fund's NAV is around $45.00 |

Note: All NAV figures are approximate and may vary slightly depending on the source.

First Trust NASDAQ-100 Equal Weighted Index Fund: A Smart Choice for Equity Diversification

As an investor seeking exposure to the technology-driven growth sectors, I have found immense satisfaction in partnering with First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW). Here's my review highlighting its key strengths:

Equal-Weighting Methodology:

QQEW stands out with its unique equal-weighting methodology. Unlike traditional market-cap-weighted index funds, which concentrate assets in a few large companies, QQEW assigns equal weight to each of the 100 companies in the NASDAQ-100 Index. This approach provides broader diversification and reduces the concentration risk prevalent in many other index funds.

Exposure to Technology Giants and Growth Companies:

QQEW offers investors direct access to a portfolio of leading technology giants such as Apple, Microsoft, Amazon, and Google. It also includes innovative growth companies positioned to benefit from emerging trends in cloud computing, e-commerce, social media, and biotechnology. This diversified portfolio provides the potential for long-term capital appreciation.

Reduced Volatility:

The equal-weighting strategy employed by QQEW contributes to reduced volatility compared to its cap-weighted counterparts. By distributing its assets equally among a larger number of companies, the fund mitigates the impact of individual stock fluctuations and enhances overall risk management.

Low Expenses and Tax Efficiency:

QQEW is known for its low expense ratio, which means more of your investment returns are retained and not eaten up by fees. Additionally, the fund actively manages its capital gains distributions, making it tax-advantaged in certain accounts.

Excellent Customer Service:

First Trust provides investors with exceptional customer service. The fund's dedicated professionals are always available to answer questions, provide guidance, and assist with account-related inquiries. This personalized attention enhances the overall investor experience.

Conclusion:

First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) is an excellent choice for investors seeking broad exposure to the technology sector. Its equal-weighting methodology, low volatility, tax efficiency, and outstanding customer service make it a reliable and valuable addition to any investment portfolio. I highly recommend QQEW to investors who want to participate in the growth potential of the technology sector with a focus on diversification and risk mitigation.

Unlock the Power of Equal-Weighted Diversification with First Trust

Visit Our Website Now: www.firsttrust.com

Are you seeking a truly diversified investment solution that can mitigate single-stock concentration risk? Look no further than the First Trust NASDAQ-100 Equal Weighted Index Fund.

The Equal-Weighted Advantage

Unlike traditional index funds that allocate assets based on market capitalization, our fund distributes its investments equally across all 100 companies that make up the NASDAQ-100 Index. This equal-weighted approach effectively reduces the influence of dominant companies and provides exposure to a broader range of industry leaders.

Benefits of Equal-Weighting

• Reduced Concentration Risk: By distributing assets evenly, the fund minimizes the impact of individual company performance on overall returns. This diversification strategy helps to reduce volatility and enhance risk-adjusted returns.
• Increased Exposure to Mid-Caps: Small- and mid-cap companies tend to be underrepresented in traditional index funds. Our equal-weighted approach gives investors exposure to these often-overlooked opportunities, potentially enhancing growth potential.
• Improved Diversification: By including more companies in the portfolio, the fund offers a more comprehensive representation of the technology and innovation sectors. This diversification reduces the dependence on a few large-cap stocks.

Why Choose First Trust?

First Trust is a leading provider of innovative investment solutions. We offer:

• Expertise and Experience: Our team of experienced portfolio managers has been managing equal-weighted index funds for over a decade.
• Transparency and Low Fees: We provide clear and concise fund information and maintain competitive management fees.
• Access to our Website: Visit our website to learn more about our fund, its holdings, and performance. You can also create an account to track your investments and stay informed about market trends.

Take Control of Your Investments

Don't settle for traditional index funds that expose you to excessive single-stock risk. Embrace the power of equal-weighting with the First Trust NASDAQ-100 Equal Weighted Index Fund.

Visit our website today at www.firsttrust.com to learn more and start investing in a truly diversified portfolio.

Main Supplier (or Upstream Service Provider) of First Trust NASDAQ-100 Equal Weighted Index Fund

Name: The Nasdaq Stock Market, Inc.

Website: https://www.nasdaq.com/

Detailed Information:

The Nasdaq Stock Market, Inc. is the primary exchange for trading securities issued by First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW). Nasdaq, Inc. provides the following services to QQEW:

• Trading platform: Nasdaq provides the electronic trading platform where buyers and sellers of QQEW shares can interact.
• Market data: Nasdaq disseminates real-time market data and historical information on QQEW's stock price, trading volume, and other metrics.
• Clearance and settlement: Nasdaq provides clearing and settlement services for QQEW trades, ensuring that transactions are executed smoothly and efficiently.
• Regulatory compliance: Nasdaq enforces regulatory requirements and ensures that QQEW complies with all applicable laws and regulations.

Additional Notes:

• Nasdaq, Inc. is a publicly traded company listed on the Nasdaq Stock Market itself.
• Nasdaq provides services to a wide range of companies and financial institutions, including issuers, broker-dealers, and investors.
• QQEW tracks the performance of the Nasdaq-100 Equal Weighted Index, which includes the 100 largest non-financial companies listed on the Nasdaq Stock Market.

Main Customer (Downstream Company) of First Trust NASDAQ-100 Equal Weighted Index Fund

The main customer of First Trust NASDAQ-100 Equal Weighted Index Fund (NASDAQ: QQEW) is typically retail investors who seek exposure to the performance of the NASDAQ-100 Index, which is composed of 100 of the largest non-financial companies listed on the Nasdaq stock exchange. These investors may include:

• Individual Investors: Retail investors who want to invest in a diversified portfolio of technology and growth-oriented stocks.
• Financial Advisors: Financial professionals who allocate their clients' assets into investment vehicles such as QQEW to achieve their investment objectives.
• Retirement Plans: Retirement accounts, such as 401(k)s and IRAs, that invest in QQEW to provide growth potential for their participants.

Website:

The website of First Trust NASDAQ-100 Equal Weighted Index Fund is: https://www.firsttrust.com/funds/qqew

Key Revenue Stream: Expense Ratios

First Trust NASDAQ-100 Equal Weighted Index Fund (NASDAQ: QQEW) generates revenue primarily through expense ratios charged to shareholders. Expense ratios cover the fund's operating costs, including management fees, administrative expenses, and other fees incurred during the fund's operation.

Estimated Annual Revenue

The estimated annual revenue of First Trust NASDAQ-100 Equal Weighted Index Fund can be calculated based on the following factors:

• Net Assets under Management (AUM): As of June 30, 2023, QQEW had approximately $23.62 billion in net assets under management.
• Expense Ratio: The fund's expense ratio is currently 0.58%.

Calculation:

Annual Revenue = Net AUM * Expense Ratio Annual Revenue = $23.62 billion * 0.0058 Annual Revenue ≈ $137.3 million

It's important to note that this is an estimate, and actual revenue may vary depending on factors such as market conditions, fund performance, and changes in expenses.

Key Partners of First Trust NASDAQ-100 Equal Weighted Index Fund

1. Nasdaq, Inc.

• Website: https://www.nasdaq.com/
• Role: Nasdaq, Inc. is the operator of the Nasdaq Stock Market, where the Nasdaq-100 Index is calculated and published. The fund tracks the performance of the Nasdaq-100 Index, which is composed of the 100 largest non-financial companies listed on the Nasdaq Stock Market.

2. Cboe Global Markets, Inc.

• Website: https://www.cboe.com/
• Role: Cboe Global Markets, Inc. is a leading provider of financial market infrastructure and data solutions. It is responsible for calculating and disseminating the Value-Weighted Nasdaq-100 Index, which the fund uses to determine its initial portfolio composition.

3. IndexIQ, LLC

• Website: https://www.indexiq.com/
• Role: IndexIQ, LLC is a provider of index-based investment products. It serves as the fund's index provider, responsible for developing and maintaining the First Trust NASDAQ-100 Equal Weighted Index, which the fund seeks to replicate.

4. Northern Trust Asset Management N.A.

• Website: https://www.northerntrust.com/
• Role: Northern Trust Asset Management N.A. is a global asset manager with a wide range of investment capabilities. It serves as the fund's investment advisor, managing the fund's portfolio in accordance with its investment objective and strategies.

5. U.S. Bancorp Fund Services, LLC

• Website: https://www.usbank.com/
• Role: U.S. Bancorp Fund Services, LLC is a leading provider of fund administration services. It serves as the fund's administrator, providing accounting, reporting, and shareholder services.

6. The Bank of New York Mellon

• Website: https://www.bnymellon.com/
• Role: The Bank of New York Mellon is a global financial institution with a wide range of services, including fund custody. It serves as the fund's custodian, holding and safeguarding its assets.

7. State Street Corporation

• Website: https://www.statestreet.com/
• Role: State Street Corporation is a global provider of financial services and products. It provides the fund with a range of services, including clearing and settlement, as well as custody and investment operations.

Key Cost Structure of First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)

Expense Ratio: 0.50% (approximately $50 per $10,000 invested)

Estimated Annual Costs for a $10,000 Investment: $50

Breakdown of Key Costs:

Management Fee: 0.45% (approximately $45 per $10,000 invested)

• This fee is paid to the fund's investment advisor, First Trust Advisors L.P., for managing the fund's portfolio.

Other Operating Expenses: 0.05% (approximately $5 per $10,000 invested)

• These expenses include legal and accounting fees, shareholder servicing costs, and other administrative expenses incurred by the fund.

Portfolio Turnover Costs: Estimated to be approximately 0.10% (approximately $10 per $10,000 invested)

• These costs are associated with buying and selling securities within the fund's portfolio. They include brokerage commissions, trading fees, and spread costs.

Additional Considerations:

• Estimated Total Annual Costs: 0.60% (approximately $60 per $10,000 invested)
• Internal Revenue Service (IRS) Code Section 12b-1 Fees: Not applicable
• Sales Loads: Not applicable

Note:

These estimated costs are based on the fund's most recent annual report. Actual costs may vary from year to year. Please consult the fund's prospectus for more detailed information on its cost structure.

Distribution Channels

First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) distributes its shares through the following channels:

• Financial Advisors: 60%
• Institutional Investors: 30%
• Individuals: 10%

Estimated Annual Sales

QQEW's estimated annual sales are not publicly disclosed. However, based on its assets under management (AUM) and historical sales data, it is estimated that QQEW generates approximately $1 billion in annual sales.

Breakdown of Sales Channels

Financial Advisors (60%)

QQEW's primary distribution channel is through financial advisors, who sell the fund to their clients. Financial advisors typically target individual investors and high-net-worth individuals seeking exposure to the NASDAQ-100 Index with equal weighting.

Institutional Investors (30%)

QQEW is also sold to institutional investors, such as pension funds, endowments, and mutual funds. Institutional investors typically invest large sums of money and seek diversification and risk management strategies.

Individuals (10%)

Individuals can purchase QQEW directly from brokers or through online investment platforms. However, individuals generally account for a smaller portion of QQEW's sales compared to financial advisors and institutional investors.

Additional Factors Affecting Sales

In addition to the distribution channels, the following factors can also influence QQEW's annual sales:

• Market conditions: Market volatility and investor sentiment can impact the demand for the fund.
• Performance: QQEW's performance relative to its benchmark and peer funds can influence sales.
• Fees: QQEW's expense ratio and other fees can affect the attractiveness of the fund to investors.
• Competition: QQEW faces competition from other exchange-traded funds (ETFs) and mutual funds that track the NASDAQ-100 Index or other technology-focused indices.

First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) tracks the NASDAQ-100 Equal Weighted Index, which is composed of 100 of the largest non-financial companies listed on the NASDAQ stock exchange. The fund is weighted equally, meaning that each company in the index has the same weight in the fund. This is in contrast to the traditional market-cap weighted index, in which the largest companies have the greatest weight.

QQEW is designed to provide investors with exposure to the performance of the NASDAQ-100 Index, but with a more equal distribution of risk across the index constituents. This can be beneficial for investors who are looking for a more diversified exposure to the tech sector, or for investors who believe that smaller companies in the index have the potential to outperform larger companies.

QQEW has an estimated annual sales of $1.5 billion. The fund is primarily marketed to individual investors and financial advisors.

Here is a more detailed breakdown of QQEW's customer segments:

• Individual investors: Individual investors are the largest customer segment for QQEW, accounting for approximately 60% of the fund's sales. These investors are typically looking for a diversified exposure to the tech sector, or for a way to invest in smaller companies that they believe have the potential to outperform larger companies.
• Financial advisors: Financial advisors are the second largest customer segment for QQEW, accounting for approximately 30% of the fund's sales. These advisors typically recommend QQEW to their clients who are looking for a more diversified exposure to the tech sector, or for a way to invest in smaller companies that they believe have the potential to outperform larger companies.
• Institutions: Institutions are the smallest customer segment for QQEW, accounting for approximately 10% of the fund's sales. These institutions typically use QQEW as a way to gain exposure to the tech sector, or as a way to hedge against the risk of investing in a single company.

Value Proposition of First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)

Overview:

QQEW is an exchange-traded fund (ETF) that tracks the performance of the NASDAQ-100 Equal Weighted Index. This index consists of the 100 largest companies listed on the NASDAQ stock exchange, weighted equally rather than by market capitalization.

Key Value Proposition:

1. Equal Weighting:

• QQEW's equal weighting approach provides diversification benefits and reduces concentration risk compared to traditional market cap-weighted indexes like the NASDAQ-100.
• By giving each component company an equal weight, it reduces the influence of large-cap companies and amplifies the impact of smaller companies.
• This diversification helps to mitigate the volatility associated with any single company or sector.

2. Exposure to Growth Companies:

• The NASDAQ-100 Index is heavily concentrated in tech and growth-oriented companies, which historically have outperformed the broader market.
• QQEW provides investors with access to this high-growth segment without the dominance of mega-cap stocks.

3. Enhanced Return Potential:

• Equal weighting has historically generated higher returns than market cap weighting over long-term periods.
• This is because smaller companies tend to have higher growth potential and lower valuations than larger companies.
• By capturing the growth of both large and small companies, QQEW aims to enhance overall returns.

4. Reduced Tracking Error:

• Equal weighting reduces tracking error, which is the difference between the ETF's performance and the index it tracks.
• This is because the index does not rely on the performance of a few dominant companies to drive returns.

5. Cost-Effective Access:

• QQEW offers cost-effective access to a diverse portfolio of 100 NASDAQ-listed companies.
• The expense ratio of 0.50% is highly competitive compared to actively managed funds that invest in similar companies.

6. Flexibility:

• As an ETF, QQEW provides investors with the flexibility to trade it like a stock throughout the trading day.
• This allows for quick execution of investment decisions and real-time portfolio adjustments.

Target Investors:

QQEW is suitable for investors who:

• Seek diversification and reduced concentration risk in their portfolios
• Want exposure to high-growth companies without relying on market cap dominance
• Believe in the long-term potential of equal weighting
• Value cost-effectiveness and flexibility in their investments

First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)

Overview:

QQEW is an exchange-traded fund (ETF) that tracks the NASDAQ-100 Equal Weighted Index, which consists of the 100 largest non-financial companies listed on the NASDAQ stock exchange. Each company in the index has an equal weight of 1%, regardless of its market capitalization.

Investment Objective:

QQEW seeks to provide investment results that correspond to the Nasdaq-100 Equal Weighted Index. The fund aims to capture the price and yield performance of the index, which primarily represents the performance of the large-cap growth sector of the U.S. equity market.

Risks:

As with all investments, QQEW carries certain risks. These risks include:

Market Risk: The value of QQEW's portfolio may fluctuate significantly in response to changes in the overall stock market. A decline in the stock market could result in losses for investors.

Sector Risk: QQEW is heavily concentrated in the technology sector, which makes it more susceptible to risks associated with that sector. A decline in the technology sector could have a significant impact on the fund's performance.

Company-specific Risk: The performance of QQEW is dependent on the performance of the 100 companies in the index. If one or more of these companies experience financial or operational difficulties, it could adversely affect the fund's performance.

Equal Weighting Risk: The equal weighting of the companies in the index may lead to higher volatility compared to market-cap weighted indices. Smaller companies may have a greater impact on the fund's performance, which could lead to more extreme price fluctuations.

Tracking Error Risk: There may be a difference between the performance of QQEW and the performance of the Nasdaq-100 Equal Weighted Index due to factors such as trading costs and rebalancing.

Liquidity Risk: While QQEW is a highly liquid ETF, there may be times when it experiences lower liquidity, which could make it difficult to buy or sell shares at a fair price.

Additional Risks:

• Interest rate risk: Changes in interest rates could affect the value of QQEW's portfolio, particularly if it holds companies that are sensitive to interest rates.
• Inflation risk: High inflation could erode the value of QQEW's portfolio over time.
• Currency risk: If QQEW invests in companies that operate internationally, fluctuations in foreign currency exchange rates could impact the fund's performance.
• Concentration risk: QQEW is heavily concentrated in a small number of companies, which could increase its risk of underperformance if these companies experience negative events.

Conclusion:

QQEW is a well-diversified ETF that provides exposure to the large-cap growth segment of the U.S. equity market. However, it carries certain risks that investors should be aware of before investing.