A smart beta exchange traded fund, the First Trust NASDAQ-100-Technology Sector ETF (QTEC) debuted on 04/19/2006, and offers broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. QTEC has been able to amass assets over $4.01 billion, making it one of the larger ETFs in the Technology ETFs. Before fees and expenses, QTEC seeks to match the performance of the NASDAQ-100 Technology Sector Index.
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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.57% for QTEC, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.02%.
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.
QTEC's heaviest allocation is in the Information Technology sector, which is about 90.10% of the portfolio.
When you look at individual holdings, Broadcom Inc. (AVGO) accounts for about 2.44% of the fund's total assets, followed by Microchip Technology Incorporated (MCHP) and Globalfoundries Inc. (GFS).
Its top 10 holdings account for approximately 23.6% of QTEC's total assets under management.
Performance and Risk
So far this year, QTEC has added roughly 7.27%, and is up about 10.15% in the last one year (as of 02/06/2025). During this past 52-week period, the fund has traded between $169.92 and $205.38.
QTEC has a beta of 1.15 and standard deviation of 30.01% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 46 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 $73.61 billion in assets, Vanguard Information Technology ETF has $84.97 billion. XLK has an expense ratio of 0.09% 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
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Get it free >>First Trust NASDAQ-100-Technology Sector ETF (QTEC): ETF Research Reports
Microchip Technology Incorporated (MCHP) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
Vanguard Information Technology ETF (VGT): ETF Research Reports
GlobalFoundries Inc. (GFS) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
