I’m Keith DeGreen and this is your Investors Minute.
QQQ is the ticker of the popular NASDAQ 100 Index ETF – the 100 largest companies traded on the NASDAQ exchange. But QQQ is “cap” weighted. This means it gives greater weight to companies with the largest value of outstanding stock.
In QQQ, Apple Computer is the largest component. It constitutes about 14% of the index.
But another NASDAQ 100 ETF, QQEW, is “equal” weighted. Apple, and the other 99 companies in it each comprise about one percent of the index.
Another example: Both SPY and RSP track the S&P 500 index. But SPY is cap weighted while RSP is equal weighted.
While investment pros debate which approach is best, you should note that most of the popular ETFs are cap weighted.
All good, but know what you’re buying.
FEE-ONLY DeGreen Capital Management. Pioneers in low-cost exchange-traded fund investing. Irvine: 949-333-4550. Scottsdale: 480-609-9900. www.DeGreen.com. Minimum portfolio requirement $1,000,000.
©DeGreen Capital Management LLC. All rights reserved.