Lighten Up On FAANG With This Nifty Nasdaq ETF

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

For much of this year, the Nasdaq-100 Index (NDX), bolstered by the likes of Apple, Inc. AAPL and, Inc. AMZN, has been a hot, beloved index.

What Happened

The traditional Nasdaq-100, the one most investors follow, is cap-weighted, meaning Apple, Microsoft Corporation MSFT and other revered growth names take on out-sized portions of the benchmark.

That's great on the way up, but some investors may look to defray that concentration risk with the Direxion NASDAQ-100 Equal Weighted Index Shares QQQE. QQQE, which is one of the largest non-leveraged of exchange-traded funds in the Direxion stable, tracks the NASDAQ-100 Equal Weighted TR Index (NDXE).

Why It's Important

“Because NDX is a modified market-cap-weighted index, it essentially 'doubles down' on its best-performing constituents,” according to Nasdaq Global Indexes. “Over the past decade, this has been a good thing for investors, as large-cap Tech has trounced most other corners of the public equity markets.”

As noted above, the NDX methodology is great when names like Amazon, Apple and Microsoft, among others, are firing on all cylinders. However, NDXE, the equal-weight benchmark, offers investors the dual benefit of reduced concentration risk and increased exposure to smaller stocks.

“While not proven to be always superior from a return or risk perspective, NDXE offers investors the benefit of maintaining stable, 1%-each weightings to all 100 of NDX’s companies, rebalanced quarterly (as opposed to NDX’s annual rebalancing schedule),” according to Nasdaq. “This means that, instead of allocating more than half its weight to the top 10 constituents, NDXE allocates only 10%. It also means that, on a sector level, weights are more diversified and less concentrated in Technology.”

What's Next

Currently, QQQE is 673 basis points underweight tech and 603 basis underweight communication services relative to the cap-weighted NDX. The ETF's noticeable overweights are healthcare (753 basis points) and industrials (just over 5%).

Additionally, QQQE's underlying index is showing some benefits this year compared to the S&P 500 Equal Weight Index.

“But in 2020 in particular, the more interesting story is the volatility differential between NDXE and SPW (the equal-weighted S&P 500 Index),” notes Nasdaq. “Despite historically registering generally lower volatility than NDXE, SPW has experienced annualized daily volatility of 46.9% thus far in 2020, vs. only 42.2% for NDXE. This is despite having exposure to more sectors generally, and 5 times as many constituents.”

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.

Posted In: direxionLong IdeasNewsBroad U.S. Equity ETFsTrading IdeasETFs

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.