Learn About the QQQ ETF and NASDAQ-100 Index

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Simply stated, QQQQ is the Invesco Exchange-Traded Fund, which tracks the NASDAQ 100. As a former options trader who traded this ETF, we often referred to QQQQ as the Q’s, the cubes, and the quad Q’s. And most recently, the symbol has been changed from QQQQ to QQQ.

What Is the Nasdaq 100 Index?

It always helps to know about the underlying index before you consider any index ETF for your investing strategy. The NASDAQ 100 Index (NDX) is a collection of the largest 100 non-financial companies (both domestic and foreign) listed on the NASDAQ exchange. The stocks in the index are market-cap weighted; however, there are limitations on the weights to prevent any particular company from having too much influence on price. No company can have more than 24% of the weight of the index.

The QQQQ and NASDAQ 100

No financial companies. That’s the first thing to know. If you are looking to trade mortgage and banking securities that are listed on the NASDAQ, you want to check out the NASDAQ Financial 100 (IXF).

All of the companies in the NDX and Q’s are NASDAQ listed stocks. They have to be listed for at least 2 years, with the exception of some heavy hitters (cap-wise) who only have to be around for 1 year. Also, the stocks need to trade at least 200,000 daily shares, report quarterly and annually, and not have any bankruptcy issues.

The index and ETF are rebalanced yearly and at the same time to avoid arbitrage. The price of each security is based on the last trading day of October and the number of shares is based on the last trading day of November.

The non-financial industries represented are healthcare, retail, transportation, telecommunications, biotechnology, technology, services, media, and industrial. As for the companies in the fund and index, they include many popular firms like Google, Teva Pharmaceuticals, Microsoft, Paychex, and Qualcomm. A complete and up-to-date list can be found on the NASDAQ website.

Difference Between QQQQs and Other Major Index ETFs

Unlike the NASDAQ Composite Index (IXIC), the Q’s only track the stocks in the NDX, which is only 100 companies. The NASDAQ Composite Index tracks all of the stocks listed on the NASDAQ, more than 3,000 symbols.

Also, the Q’s do not consist of any financial companies. They can be found in the NASDAQ Financial 100 (IXF). As for the DIJA and S&P 500 Indexes (and SPDRS), they are different since they include financial companies and do not have the market-cap limitations of the NDX and Q’s.

Are There Other Q’s or NDX Assets for Investing?

Absolutely. While leveraged ETFs are for advanced trading strategies, there is a leveraged fund for the NDX. The ProShares Ultra QQQ (QLD) seeks to emulate twice the daily return of the NDX. And there is also QID, the ProShares UltraShort ETF, which is another leveraged fund, but also an inverse ETF since it tracks the inverse performance of the NDX. So QID and QLD track the index in different directions.

And don’t forget about the above-mentioned options on the Qs. Again, options trading is more of an advanced strategy (as I know all too well), but if utilized correctly, options can be great hedging instruments and can create time-constrained exposure to the index and ETF.

Should you Include QQQs in your portfolio? That is an answer you need to find yourself. As with any investment, conducting thorough research is a must. Hopefully, this article helps you with your decision. And if you want to learn more about ETFs in general, this site is a great place to start.