For years, the Nasdaq-100 Index (NDX) has been generally known as the premier large-cap benchmarks for advisors and buyers in search of publicity to revolutionary corporations.
The index launched on Jan. 31, 1985 as a house to the 100 largest non-financial, Nasdaq-listed corporations. Since then, it is grow to be a power amongst benchmarks and a go-to vacation spot for market members in search of. At the moment, there are alternate traded merchandise monitoring the Nasdaq-100 buying and selling in 31 international locations with over $200 billion allotted to these methods.
Importantly, NDX has a legacy of not solely outperforming another well-known home fairness gauges, however proving surprisingly sturdy in tough market environments, too.
“It might appear counterintuitive that the U.S. inventory market has continued to set file highs by way of the uncertainty and unpredictability of the worldwide pandemic. But the data hold breaking. That is notably true of the Nasdaq-100 Index (NDX), which was up a staggering 47.6% in 2020, and 48.9% on a complete return foundation,” in keeping with Nasdaq International Indexes.
Add all these highlights up and it is clear NDX is ripe for evolution, which is going on on the alternate traded merchandise degree. That features Thursday’s debut of the ProShares Nasdaq-100 Dorsey Wright Momentum ETF (QQQA).
Contemplating QQQA Now
QQQA extends a string of latest ETF launches that observe benchmarks which might be offshoots of NDX, underscoring the dad or mum gauge’s utility and asset-gathering acumen for fund issuers.
The latest ETF from Maryland-based ProShares follows the Nasdaq-100 Dorsey Wright Momentum Index. Utilizing Dorsey Wright’s proprietary relative energy methodology, which serves because the index methodology for a slew of different ETFs, QQQA makes an attempt to supply buyers a basket NDX members with the most effective upside potential.
“Dorsey Wright defines excessive value momentum shares as these shares whose value has appreciated greater than others over a specified interval,” in keeping with ProShares. “Dorsey Wright ranks every inventory within the Nasdaq-100 index based mostly on relative efficiency in accordance with its proprietary ‘Relative Power’ momentum measure. The 21 shares ranked highest are chosen into the index at reconstitution and assigned equal weights.”
Many self-directed buyers is probably not conscious of this, however the Dorsey Wright relative energy methodology has a faithful following amongst skilled buyers as there’s $11 billion in property allotted to it.
Novice buyers can take that as an indication QQQA is backed by a reputable, time-tested technique that positions customers to seize momentum – an funding issue with long-term sturdiness, however one which’s additionally arduous to deploy when merely selecting particular person securities at a random.
QQQA Fascinating Complexion
The brand new QQQA, not surprisingly, appears to be like far completely different than conventional cap-weighted ETFs linked to NDX. So completely different in reality that growth-hungry buyers can really think about each ideas collectively.
The ProShares ETF allocates 50.51% of its weight to know-how shares, an obese of almost 300 foundation factors relative to NDX. Even with that, the brand new ETF options no publicity to Apple (AAPL) or Microsoft (MSFT), indicating that it may be helpful diversification software for buyers holding conventional tech funds.
Different sector variations embrace QQQA being underweight communication providers and shopper discretionary names relative to NDQ whereas being obese healthcare. None of QQQA’s elements exceed weights of 5.31%. Alone, Apple is greater than 11% of NDX.
The brand new ETF prices 0.58% per 12 months, or $58 on a $10,000 funding.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.