Should You Invest in the First Trust NASDAQ100Technology Sector ETF (QTEC)?

Launched on 04/19/2006, the First Trust NASDAQ100Technology Sector ETF (QTEC) is a passively managed exchange traded fund designed to provide a broad exposure to the Technology - Broad segment of the equity market.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 10, placing it in bottom 38%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $2.08 billion, making it one of the larger ETFs attempting to match the performance of the Technology - Broad segment of the equity market. QTEC 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.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.57%, 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

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector--about 90.90% of the portfolio.

Looking at individual holdings, Splunk Inc. (SPLK) accounts for about 2.57% of total assets, followed by Advanced Micro Devices, Inc. (AMD) and Nvidia Corporation (NVDA).

The top 10 holdings account for about 24.85% of total assets under management.

Performance and Risk

So far this year, QTEC has lost about -24.26%, and is down about -10.75% in the last one year (as of 04/25/2022). During this past 52-week period, the fund has traded between $131.75 and $180.39.

The ETF has a beta of 1.09 and standard deviation of 31.35% for the trailing three-year period, making it a high risk choice in the space. With about 43 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NASDAQ100Technology Sector ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, QTEC is a great option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that 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 $43.35 billion in assets, Vanguard Information Technology ETF has $45.42 billion. XLK has an expense ratio of 0.10% and VGT charges 0.10%.

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.