Is First Trust NASDAQ-100-Technology Sector ETF (QTEC) a Strong ETF Right Now?

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?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is sponsored by First Trust Advisors. It has amassed assets over $3.98 billion, making it one of the largest 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.

Annual operating expenses for QTEC are 0.57%, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.07%.

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 89.60% of the portfolio. Telecom and Consumer Discretionary round out the top three.

Looking at individual holdings, Texas Instruments Incorporated (TXN) accounts for about 2.54% of total assets, followed by Apple Inc. (AAPL) and Analog Devices, Inc. (ADI).

The top 10 holdings account for about 25.19% of total assets under management.

Performance and Risk

Year-to-date, the First Trust NASDAQ-100-Technology Sector ETF return is roughly 8.60% so far, and it's up approximately 35.23% over the last 12 months (as of 05/30/2024). QTEC has traded between $137.75 and $195.66 in this past 52-week period.

QTEC has a beta of 1.18 and standard deviation of 29.82% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 42 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 $66.64 billion in assets, Vanguard Information Technology ETF has $69.22 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

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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First Trust NASDAQ-100-Technology Sector ETF (QTEC): ETF Research Reports

Analog Devices, Inc. (ADI) : Free Stock Analysis Report

Texas Instruments Incorporated (TXN) : Free Stock Analysis Report

Apple Inc. (AAPL) : Free Stock Analysis Report

Technology Select Sector SPDR ETF (XLK): ETF Research Reports

Vanguard Information Technology ETF (VGT): ETF Research Reports

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Zacks Investment Research

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

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