ETF Pioneer Focuses on Big Tech
The fund known as Qubes tilts toward large growth companies by tracking the Nasdaq 100.
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One of the biggest and oldest exchange-traded funds, PowerShares QQQ (symbol QQQ) is a low-cost and easy way to invest in large-company growth stocks in general and big technology firms in particular. Tech accounts for a whopping 64% of the ETF's assets.
QQQ has a distinct personality. It tracks the Nasdaq 100 index, which consists of the 100 largest stocks, ranked by market value, on the Nasdaq Stock Market. The index includes both U.S. and foreign firms but excludes financial stocks. With Nasdaq the preferred exchange for tech and biotech companies, the index typically holds some of the market's hottest growth stocks.
(Editor's Note: After the April 29 market close, NASDAQ will rebalance the index to reduce the outsized role of Apple (AAPL). The tech titan now accounts for about 21% of the index's -- and the ETF's -- assets. The change will drop Apple's share of the index and ETF to a still hefty 12%. For more about the company, see Apple: The Core of Every Portfolio?)
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Among its nontech holdings, QQQ includes well-known companies such as Starbucks, Comcast and Israel's Teva Pharmaceutical. One of its quirks is that it owns no energy stocks.
Not surprisingly, QQQ is volatile. Over the past five years, it has been about 20% jumpier than Standard & Poor's 500-stock index. Surprisingly, QQQ lost less than the S&P 500 during the 2007-09 bear market, falling 51.6%, compared with the S&P 500's 55.3% drop.
As for the odd name, the ETF originally traded on the American Stock Exchange as Nasdaq 100 Index Tracking Stock under the symbol QQQ. Traders called it the triple Q, or "Qubes," for short. When the ETF moved to Nasdaq in 2004, it needed a four-letter ticker, so an extra Q was added. In 2006, PowerShares bought the ETF from Nasdaq and renamed it PowerShares QQQ. (Editor's Note: The ETF retained the quadruple-Q ticker until March 23, 2011, when the symbol was changed back to QQQ.)
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