First Trust NASDAQ-100 Ex-Technology Sector Index Fund | research notes

Introducing First Trust NASDAQ-100 Ex-Technology Sector Index Fund

Overview

The First Trust NASDAQ-100 Ex-Technology Sector Index Fund (тикер: QTEC) is an exchange-traded fund (ETF) that tracks the performance of the NASDAQ-100 Index, excluding stocks from the Technology sector. This unique fund provides investors with exposure to the broader US equity market, while limiting their exposure to the technology sector's potential volatility.

Index Tracking

The NASDAQ-100 Index is a widely recognized benchmark that tracks the largest non-financial companies listed on the NASDAQ stock exchange. By excluding the Technology sector, QTEC focuses on companies in sectors such as Consumer Discretionary, Consumer Staples, Health Care, and Industrials.

Investment Strategy

QTEC employs a passive investment strategy, meaning it seeks to replicate the performance of the NASDAQ-100 Ex-Technology Sector Index. The fund uses a sampling technique to provide a representative exposure to the index, ensuring that its portfolio reflects the sector composition and risk-reward profile of the underlying index.

Market Capitalization

QTEC primarily invests in large-cap companies, with a median market capitalization of over $100 billion. This focus on established and well-capitalized companies helps to reduce volatility and provide more stable returns.

Sector Exposure

By excluding the Technology sector, QTEC offers investors diversification across other sectors. As of June 30, 2023, the fund's top sector exposures include:

• Health Care: 21.7%
• Consumer Discretionary: 19.3%
• Consumer Staples: 15.2%
• Industrials: 14.6%

Performance

QTEC has consistently outperformed the S&P 500 Index over the past five years on a risk-adjusted basis. The fund's lower volatility and exposure to sectors other than Technology have contributed to its superior risk-reward profile.

Benefits of Investing in QTEC

• Exposure to a broad range of US non-financial stocks
• Limited exposure to Technology sector volatility
• Diversification benefits across multiple industry sectors
• Track record of outperformance compared to the S&P 500 Index

Target Investors

QTEC is suitable for investors who:

• Seek diversified exposure to the US equity market
• Want to reduce volatility in their portfolio
• Believe that sectors other than Technology will outperform in the long run
• Are looking for a passive investment option

Key Considerations

• QTEC is not recommended for investors seeking high growth potential or exposure to the Technology sector.
• Past performance is not a guarantee of future results.
• The fund is subject to the risks associated with investing in the equity market.

Conclusion

The First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QTEC) provides investors with a unique opportunity to gain exposure to a broad range of US companies while limiting their exposure to the Technology sector. Its lower volatility, diversification benefits, and consistent outperformance make it an attractive option for investors seeking a balanced approach to equity investing.

Business Model of First Trust NASDAQ-100 Ex-Technology Sector Index Fund

First Trust NASDAQ-100 Ex-Technology Sector Index Fund (NASDAQ: QQQX) is an exchange-traded fund (ETF) that tracks the performance of the NASDAQ-100 Index excluding companies classified within the technology sector.

The fund's holdings primarily consist of stocks from:

• Consumer discretionary
• Consumer staples
• Energy
• Financial
• Healthcare
• Industrials
• Real estate

Advantages over Competitors:

1. Focused Exposure:

• Provides targeted exposure to non-technology sectors within the NASDAQ-100 Index.
• Reduces potential biases towards technology companies, which can dominate the broader index.

2. Diversification:

• Diversifies investments across multiple sectors, reducing industry-specific risks.
• Offers a balanced portfolio that includes a mix of growth and value stocks.

3. Cost Efficiency:

• As an ETF, QQQX has relatively low operating expenses compared to actively managed funds.
• Provides a cost-effective way to gain exposure to a broad range of non-technology stocks.

4. Tax Efficiency:

• The fund's underlying holdings are primarily large-cap stocks, which tend to generate lower dividend income.
• This results in potential tax benefits for investors who hold the fund within taxable accounts.

5. Liquidity and Transparency:

• Traded on the NASDAQ exchange, QQQX offers high liquidity and real-time pricing information.
• Daily disclosures provide investors with up-to-date portfolio holdings and performance data.

6. Track Record:

• QQQX has a long track record dating back to 2002, providing investors with confidence in its performance and stability.
• It has consistently outperformed the Russell 1000 Index, which includes technology companies.

7. Access to a Growing Market:

• Non-technology sectors within the NASDAQ-100 Index have experienced significant growth in recent years.
• QQQX enables investors to tap into this expanding market without exposure to the technology sector's volatility.

Similar Companies to First Trust NASDAQ-100 Ex-Technology Sector Index Fund

1. iShares Russell Mid-Cap Value Index ETF (IWP)

• Home Page: https://www.ishares.com/us/products/2395/ishares-russell-midcap-value-etf
• Reason Why Customers May Like It: Provides exposure to mid-cap value stocks outside the technology sector, offering diversification and growth potential in different segments of the market.

2. Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX)

• Home Page: https://investor.vanguard.com/investor-resources/education/understanding-investment-types/mid-cap-stocks
• Reason Why Customers May Like It: Low-cost option that tracks the performance of the entire mid-cap stock market, including companies from various sectors.

3. Schwab Fundamental U.S. Large Company Index ETF (FNDX)

• Home Page: https://www.schwab.com/etfs/schwab-etfs/fndx
• Reason Why Customers May Like It: Focuses on large-cap companies with strong fundamentals, providing a stable and potentially income-generating investment.

4. SPDR S&P MidCap 400 ETF (MDY)

• Home Page: https://www.spdrfunds.com/etf/mdY
• Reason Why Customers May Like It: Tracks the performance of 400 mid-cap companies, offering diversification within the mid-cap space.

5. Invesco QQQ Trust (QQQ)

• Home Page: https://www.invesco.com/us/financial-products/etfs/qqq-invesco-qqq-trust
• Reason Why Customers May Like It: While not an ex-technology fund, QQQ provides concentrated exposure to the largest and most actively traded technology stocks, offering growth potential for investors who believe in the continued dominance of tech.

First Trust NASDAQ-100 Ex-Technology Sector Index Fund

History:

• September 9, 2008: The fund was launched as the First Trust NASDAQ-100 Excluding Technology Index Fund.
• March 1, 2016: The fund's name was changed to the First Trust NASDAQ-100 Ex-Technology Sector Index Fund.
• Present: The fund continues to operate as a publicly traded exchange-traded fund (ETF) under the ticker symbol "QQXT."

Investment Objective:

The fund seeks to provide investment results that correspond generally to the price and yield performance of the NASDAQ-100 Index excluding companies classified in the technology sector.

Index Composition:

The NASDAQ-100 Ex-Technology Sector Index is a modified market capitalization-weighted index that includes 99 non-technology companies from the NASDAQ-100 Index. Technology companies are defined as those with at least 50% of their revenue derived from technology-related industries.

Investment Strategy:

• The fund invests in a portfolio of securities that generally corresponds to the composition of the index.
• It may hold up to 60% of its assets in securities not included in the index to manage risk.
• The fund rebalances its portfolio on a monthly basis to maintain its exposure to the index.

Key Features:

• Sector Exposure: Provides diversification by excluding the technology sector, which can be highly volatile.
• Growth Potential: Targets non-technology companies that have strong growth potential.
• Liquidity: Highly liquid as an ETF, allowing investors to buy and sell shares easily.
• Expense Ratio: 0.50%, which is relatively low compared to other similar ETFs.
• Dividend Yield: Pays a moderate dividend yield, providing income potential for investors.

Performance:

Since its inception in 2008, the First Trust NASDAQ-100 Ex-Technology Sector Index Fund has delivered positive returns, outperforming the NASDAQ-100 Index during periods of technology sector weakness.

Target Audience:

The fund is suitable for investors seeking:

• Diversification beyond the technology sector
• Growth potential in non-technology companies
• Income potential with a moderate dividend yield

Last Three Years

• 2020
  • March 12: Fund launches
• 2021
  • February 19: Fund reaches $1 billion in assets under management
• 2022
  • March 8: Fund reaches $2 billion in assets under management

Recent Timelines

• January 2023: Fund releases its annual report
• February 2023: Fund announces a quarterly distribution of $0.58 per share
• March 2023: Fund holds its annual shareholder meeting

Exceptional Fund for Growth-Oriented Investors: First Trust NASDAQ-100 Ex-Technology Sector Index Fund

As a seasoned investor seeking consistent growth and diversification in my portfolio, I was thrilled to discover First Trust NASDAQ-100 Ex-Technology Sector Index Fund (NASDAQ: QTEC). This innovative fund provides a unique opportunity to invest in the Nasdaq-100 Index, excluding companies primarily engaged in the technology sector.

Outstanding Performance:

Since its inception in 2016, QTEC has consistently outperformed its benchmark and the broader market. Its annualized return has surpassed the Nasdaq Composite Index and the S&P 500 Index over the past 3, 5, and 10 years. This impressive performance is a testament to its strategic selection of non-technology companies with strong fundamentals and growth potential.

Sector Diversification:

The fund's unique focus on non-technology sectors provides diversification benefits that reduce overall portfolio risk. It invests in a broad range of industries, including healthcare, consumer discretionary, financials, and industrials. This diversification strategy helps mitigate the volatility often associated with concentrated technology investments.

Exposure to Leading Companies:

By excluding technology giants, QTEC offers exposure to a diverse group of innovative and established companies that are leaders in their respective fields. The fund holds positions in companies such as Amazon, UnitedHealth Group, Visa, and Nike, providing investors access to the growth potential of these industry leaders.

Active Management with a Selective Approach:

While the fund tracks the Nasdaq-100 Index, it employs an active management approach. The portfolio managers carefully select companies based on strict criteria, focusing on factors such as revenue growth, profitability, and market share. This active approach ensures that QTEC invests in companies with the highest potential for long-term appreciation.

Low Fees and Accessibility:

QTEC's expense ratio of 0.5% is highly competitive, making it accessible to investors of all sizes. It is available through various online brokerages, providing convenient access to its growth potential.

Conclusion:

First Trust NASDAQ-100 Ex-Technology Sector Index Fund is an exceptional investment vehicle for growth-oriented investors seeking diversification, exposure to leading companies, and long-term capital appreciation. Its outperformance, sector diversification, and active management approach make it a highly recommended choice in any diversified portfolio.

Unlock Unprecedented Growth Potential with First Trust NASDAQ-100 Ex-Technology Sector Index Fund

Are you an investor seeking robust returns from the world's leading companies outside the technology industry? Look no further than First Trust NASDAQ-100 Ex-Technology Sector Index Fund (Nasdaq: QQQX).

Unleashing the Power of Non-Tech Innovation

The NASDAQ-100 Index is widely recognized as a barometer of the high-tech sector's performance. However, QQQX offers a unique perspective by excluding the technology giants that dominate the index. This allows investors to diversify their portfolios and tap into the growth potential of a broader universe of companies.

Diversify Your Risk

By excluding technology stocks, QQQX provides a more balanced approach to investing in the U.S. equity market. The fund's non-tech holdings come from sectors such as consumer discretionary, healthcare, and industrials, reducing the overall risk associated with concentration in a single industry.

Exceptional Performance Track Record

Since its inception in 2012, QQQX has consistently outperformed the NASDAQ-100 Index. The fund's annualized return over the last 10 years stands at an impressive 15.67%, compared to 14.28% for the NASDAQ-100.

Expert Fund Management

QQQX is managed by the experienced fund management team at First Trust Portfolios. With a proven track record of success, the team employs a rigorous index-tracking strategy to ensure that the fund closely aligns with the performance of the NASDAQ-100 Ex-Technology Sector Index.

Unlock Growth and Diversification

If you're seeking a high-growth, diversified investment solution that taps into the untapped potential of non-tech companies, QQQX is the ideal choice for you. With its proven performance record, expert management, and competitive expense ratio, QQQX offers the following benefits:

• Exposure to leading companies outside the technology sector
• Diversification across multiple industries
• Potential for superior returns over the long term
• Professional fund management

Visit the First Trust website at https://www.firsttrust.com/funds/etfs/qqqx to learn more about QQQX and unlock the potential of non-tech innovation in your portfolio.

Main Supplier (or Upstream Service Provider) of First Trust NASDAQ-100 Ex-Technology Sector Index Fund

Name: Nasdaq, Inc.

Website: www.nasdaq.com

Services Provided:

Nasdaq, Inc. is a leading provider of financial market infrastructure services, including:

• Data and analytics: Nasdaq provides real-time and historical market data, news, and analysis to investors, traders, and other market participants.
• Trading and clearing: Nasdaq operates one of the largest equity markets in the world, facilitating the trading and clearing of stocks, options, and other financial instruments.
• Technology solutions: Nasdaq offers a range of technology solutions to financial institutions and other organizations, including trading software, data management systems, and risk management tools.

Specific Services Provided to First Trust NASDAQ-100 Ex-Technology Sector Index Fund:

Nasdaq provides the following specific services to First Trust NASDAQ-100 Ex-Technology Sector Index Fund:

• Index calculation and maintenance: Nasdaq calculates and maintains the NASDAQ-100 Ex-Technology Sector Index, which is the underlying benchmark for the First Trust NASDAQ-100 Ex-Technology Sector Index Fund.
• Data licensing: Nasdaq licenses the NASDAQ-100 Ex-Technology Sector Index data to First Trust to use in the management of the fund.
• Advisory services: Nasdaq provides advisory services to First Trust on the NASDAQ-100 Ex-Technology Sector Index and other related matters.

Importance of Nasdaq as a Main Supplier:

Nasdaq is a critical main supplier for First Trust NASDAQ-100 Ex-Technology Sector Index Fund because it provides the underlying index for the fund and other essential services. Without Nasdaq's services, First Trust would not be able to offer the fund to investors.

Other Suppliers:

In addition to Nasdaq, First Trust may also use other suppliers for various services, such as:

• Custodian: A financial institution that holds and safeguards the fund's assets.
• Administrator: A company that handles the day-to-day operations of the fund, including processing subscriptions and redemptions.
• Transfer agent: A company that registers and transfers ownership of the fund's shares.

Main Customer (Downstream Company) of First Trust NASDAQ-100 Ex-Technology Sector Index Fund

The main customers (downstream companies) of First Trust NASDAQ-100 Ex-Technology Sector Index Fund are individual and institutional investors seeking exposure to the performance of the NASDAQ-100 Index, excluding the technology sector.

Name and Website of Main Customer

• Individual Investors: Individuals who invest their personal savings in the fund through brokerages or financial advisors.
• Institutional Investors: Financial institutions such as pension funds, mutual funds, and hedge funds that invest large sums of money in the fund on behalf of their clients.

Website:

The website of First Trust NASDAQ-100 Ex-Technology Sector Index Fund is:

• https://www.firsttrust.com/funds/equity-etfs/nasdaq-100-ex-tech-sector-index-etf

Detailed Explanation

First Trust NASDAQ-100 Ex-Technology Sector Index Fund is an exchange-traded fund (ETF) that tracks the NASDAQ-100 Index, excluding companies from the technology sector. The fund provides investors with exposure to a broad range of industries, including consumer discretionary, consumer staples, healthcare, energy, and financials.

The fund's main customers are investors who believe that the technology sector is overvalued or who are seeking diversification away from technology stocks. By excluding technology companies, the fund offers investors a way to participate in the growth potential of the broader NASDAQ-100 Index without being overly exposed to the volatility of the technology sector.

Key Revenue Stream:

First Trust NASDAQ-100 Ex-Technology Sector Index Fund (NASDAQ: QQQX) is an exchange-traded fund (ETF) that tracks the performance of the NASDAQ-100 Index, excluding technology stocks. The fund's primary revenue stream is generated through management fees charged to investors.

Estimated Annual Revenue:

It is difficult to accurately determine the exact annual revenue of First Trust NASDAQ-100 Ex-Technology Sector Index Fund without access to proprietary financial data. However, based on estimates and industry averages, the fund's annual revenue can be approximated as follows:

• Assets Under Management (AUM): As of December 31, 2022, QQQX had approximately $4.05 billion in assets under management.
• Management Fee: ETF management fees typically range from 0.20% to 0.60% of assets under management annually. Assuming an average management fee of 0.40%, QQQX would generate approximately $16.2 million in annual revenue.

Other Potential Revenue Sources:

In addition to management fees, QQQX may also generate revenue through other sources, such as:

• Interest Income: The fund invests in underlying securities that may pay interest, which can contribute to its overall revenue.
• Dividend Income: QQQX's holdings may include stocks that pay dividends, which can be passed on to investors or retained by the fund.
• Trading Activity: QQQX is an actively traded ETF, and the fund may receive a portion of the bid-ask spread when investors buy or sell shares.

Note: These revenue estimates are approximate and based on current AUM and industry averages. Actual revenue may vary depending on market conditions, fund performance, and other factors.

Key Partners of First Trust NASDAQ-100 Ex-Technology Sector Index Fund

The First Trust NASDAQ-100 Ex-Technology Sector Index Fund (NASDAQ: QQQX) is a passively managed exchange-traded fund (ETF) that tracks the performance of the NASDAQ-100 Index, excluding companies classified in the technology sector.

The fund's key partners include:

1. First Trust Advisors L.P.

• Website: https://www.firsttrust.com/
• Role: Investment advisor and fund manager

First Trust Advisors L.P. is a global investment management firm with over $166 billion in assets under management. The firm provides a wide range of investment products and services to institutional and individual investors.

2. NASDAQ, Inc.

• Website: https://www.nasdaq.com/
• Role: Index provider

NASDAQ, Inc. is a global stock exchange that operates the NASDAQ Stock Exchange. The NASDAQ-100 Index is a capitalization-weighted index that tracks the performance of the 100 largest non-financial companies listed on the NASDAQ Stock Exchange.

3. State Street Corporation

• Website: https://www.statestreet.com/
• Role: ETF sponsor and administrator

State Street Corporation is a leading provider of financial services to institutional investors worldwide. The company provides a range of services, including asset management, custody, and clearing and settlement. State Street is the ETF sponsor and administrator for the First Trust NASDAQ-100 Ex-Technology Sector Index Fund.

4. The Bank of New York Mellon Corporation

• Website: https://www.bnymellon.com/
• Role: ETF custodian

The Bank of New York Mellon Corporation is a global financial services company that provides a wide range of services to institutional investors and corporations. The company is the ETF custodian for the First Trust NASDAQ-100 Ex-Technology Sector Index Fund.

5. Computershare

• Website: https://www.computershare.com/
• Role: ETF transfer agent

Computershare is a global provider of share registration and investor services. The company is the ETF transfer agent for the First Trust NASDAQ-100 Ex-Technology Sector Index Fund.

Key Cost Structure of First Trust NASDAQ-100 Ex-Technology Sector Index Fund

Management Fee: 0.60% of average daily net assets

Example of Annual Cost: For a $100,000 investment, the annual management fee would be $0.60 x $100,000 = $600

Other Expenses:

Operating Expenses: These expenses include the fund's operating costs, such as accounting, legal, and administrative fees. The estimated annual operating expenses are 0.15% of average daily net assets.

Example of Annual Cost: For a $100,000 investment, the annual operating expenses would be $0.15 x $100,000 = $150

Transaction Costs: These costs are incurred when the fund buys or sells securities. The estimated annual transaction costs are 0.05% of average daily net assets.

Example of Annual Cost: For a $100,000 investment, the annual transaction costs would be $0.05 x $100,000 = $50

Total Annual Cost:

The total annual cost of investing in the First Trust NASDAQ-100 Ex-Technology Sector Index Fund is estimated to be 0.80% of average daily net assets.

Example of Total Annual Cost: For a $100,000 investment, the total annual cost would be $0.80 x $100,000 = $800

Note: The actual costs may vary depending on the fund's performance and the market conditions.

Sales Channels

First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT) is an exchange-traded fund (ETF) that provides exposure to the performance of the Nasdaq-100 Index, excluding technology companies. QQXT is actively traded on the Nasdaq Stock Market under the ticker symbol "QQXT."

Estimated Annual Sales

QQXT's estimated annual sales are not publicly reported. However, it is important to note that ETFs, like QQXT, do not have traditional sales in the same way that individual stocks do. Instead, the number of shares outstanding and the trading volume of the ETF represent the level of investor demand and activity.

Additional Information

QQXT's current assets under management (AUM) and other relevant information can be obtained from the following sources:

• First Trust Advisors website: https://www.firsttrust.com/
• Nasdaq Global Select Market website: https://www.nasdaq.com/
• Yahoo Finance website: https://finance.yahoo.com/quote/QQXT?p=QQXT&.tsrc=fin-srch

It is important to consult these sources for the most up-to-date and accurate information regarding QQXT's sales and other key metrics.

Customer Segments

The First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT) primarily targets investors seeking exposure to the non-technology sector of the NASDAQ-100 Index. The fund aims to provide investors with:

• Diversification away from the technology-heavy NASDAQ-100 Index
• Exposure to a broad range of non-technology industries
• Potential for capital appreciation and income generation

Estimated Annual Sales

The estimated annual sales for First Trust NASDAQ-100 Ex-Technology Sector Index Fund are not publicly disclosed. However, based on the fund's assets under management (AUM) and expense ratio, we can approximate its annual revenue:

• Assets under management (AUM): As of March 31, 2023, the fund had approximately $1.3 billion in AUM.
• Expense ratio: The fund's annual expense ratio is 0.5%.

Calculation: Annual revenue = AUM * Expense ratio

Annual revenue = $1.3 billion * 0.005 = $6.5 million

Target Customer Profile

The fund is suitable for investors with the following characteristics:

• Investment goals: Capital appreciation and income generation
• Risk tolerance: Moderate to high
• Time horizon: Medium to long-term
• Investment knowledge: Some understanding of the NASDAQ-100 Index and the non-technology sector is helpful
• Tax considerations: Eligible for potential tax benefits through dividends and capital gains distributions

Sector Allocation

The fund invests in companies across various non-technology sectors, including:

• Consumer discretionary
• Consumer staples
• Financials
• Industrials
• Healthcare
• Energy
• Utilities

Top Holdings

As of March 31, 2023, the fund's top holdings included:

• UnitedHealth Group (UNH)
• Home Depot (HD)
• Nike (NKE)
• Comcast (CMCSA)
• Mastercard (MA)

Risks

• Market risk: The fund's value can fluctuate in response to overall market conditions.
• Industry concentration risk: The fund's focus on non-technology sectors makes it more susceptible to industry-specific events.
• Interest rate risk: Rising interest rates can reduce the value of dividend-paying stocks.
• Currency risk: The fund may hold assets in foreign currencies, which introduces currency exchange risk.
• Tracking error: The fund's performance may differ from the NASDAQ-100 Ex-Technology Sector Index.

Value Proposition of First Trust NASDAQ-100 Ex-Technology Sector Index Fund (NASDAQ: QQQX)

Investment Objective: To provide investment results that generally correspond to the price and yield performance of the NASDAQ-100 Index, excluding companies classified in the technology sector.

Key Features:

• Sector Diversification: Excludes the technology sector, which has historically been a significant driver of the NASDAQ-100 Index. This diversification reduces portfolio concentration and potential volatility.
• Access to Growth Companies: Tracks the remaining 98 companies in the NASDAQ-100 Index, which represent a diverse array of growth industries, including consumer discretionary, healthcare, industrials, and financials.
• Transparent Benchmark: Based on the well-known and widely followed NASDAQ-100 Index, providing clear and accessible performance comparison.
• Low Expense Ratio: Charges an annual expense ratio of 0.3% or less, making it a cost-effective investment option.
• Monthly Dividend Payments: Distributes dividends on a monthly basis, providing investors with a potential source of regular income.

Benefits for Investors:

• Reduced Sector Concentration: Investors can gain exposure to a broader range of industries, reducing their reliance on the technology sector.
• Diversified Growth Potential: Access to companies in growing sectors beyond technology, such as consumer staples, healthcare, and financials.
• Improved Risk-Reward Profile: Diversification helps mitigate risk while maintaining growth potential.
• Cost-Effective Access: Low expense ratio provides investors with greater returns on their investment.
• Regular Income: Monthly dividend payments offer a potential income stream.

Target Audience:

• Investors seeking exposure to growth companies outside the technology sector
• Investors seeking to diversify their portfolios
• Investors looking for cost-effective alternatives to tech-heavy investments
• Investors interested in regular income from dividend payments

Comparison to Competitors:

QQQX competes with other sector-exclusion ETFs, such as the iShares U.S. Technology Ex-Mega Cap ETF (IYW) and the Invesco QQQ Trust (QQQ). However, QQQX offers a unique combination of sector diversification, growth potential, low expenses, and regular dividends.

Fund Overview

First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT) is an exchange-traded fund (ETF) that tracks the NASDAQ-100 Ex-Technology Sector Index. The index excludes companies from the NASDAQ-100 Index that are classified as technology companies. As a result, QQXT provides exposure to a diversified portfolio of large-cap growth companies across various industries.

Risk Factors

Like all investments, QQXT is subject to a variety of risks, including:

Market Risk: The value of QQXT's underlying securities can fluctuate with the overall market conditions. Economic downturns, political events, and other market disruptions can lead to declines in stock prices, potentially affecting the fund's value.

Sector Concentration Risk: QQXT is heavily concentrated in the healthcare and consumer discretionary sectors, which account for approximately 50% of the fund's portfolio. This concentration can make the fund more susceptible to fluctuations in these sectors.

Interest Rate Risk: Rising interest rates can negatively impact the value of growth stocks, which are typically more sensitive to interest rate changes than value stocks. QQXT's exposure to growth companies may make it more susceptible to interest rate fluctuations.

Inflation Risk: High inflation can erode the purchasing power of the fund's investments. Companies in QQXT's portfolio may struggle to maintain profit margins in an inflationary environment, impacting their stock prices.

Management Risk: The fund's sub-advisor, First Trust Advisors L.P., is responsible for selecting and managing the underlying securities. The performance of the fund will depend on the skill and judgment of the sub-advisor.

Other Risks:

• Liquidity Risk: QQXT is a relatively small ETF, which may make it more difficult to buy or sell shares during periods of high market volatility.
• Tracking Error Risk: QQXT may not perfectly track the performance of its benchmark index due to factors such as trading costs and sampling error.
• Currency Risk: QQXT holds a small number of non-U.S. stocks, which exposes the fund to currency exchange rate fluctuations.

Conclusion

QQXT offers exposure to a diversified portfolio of large-cap growth companies outside the technology sector. However, investors should be aware of the fund's risk factors, including market risk, sector concentration risk, and interest rate risk. By carefully considering these risks and their investment objectives, investors can determine if QQXT is a suitable addition to their portfolio.