Question

Evaluating ETF performance. Do an online search for information on the Powershares QQQ Exchange Trade Fund (ETF). Discuss what information you need to evaluate the performance of the ETF, and use what you find to evaluate the QQQ ETF. What kind of investor should invest in this ETF?

Answer 1

QQQ ETF:

The power shares QQQ ETF was previously known as QQQQ is a widely traded ETF that tracks the NASDAQ 100 index. This is a marketable security that trades on an exchange offering the traders an option to invest in the largest 100 non financial companies that are listed in the NASDAQ.

The QQQ tracks various sectors like information technology, healthcare, consumer staples, industrial & telecommunication service sectors. The QQQ is generally rebalanced quarterly & reconstituted annually.

Investors looking for an ETF that comes with a very low expense ratio & track quality names can consider the QQQ.

Information required evaluating the performance of the ETF:

Following are the information required to evaluate the etf’s performances:

• The first & foremost thing is the expense ratio which is nothing but the rate charged by the fund to do its job.
• The next thing is information on fees. The lower the better. But that doesn’t mean that all funds with less fees track their indexes well. It is sensible to focus on the fund’s tracking results.
• Still, it’s not only about performance. Investors also turn to ETFs for tax reasons. By their very structure, ETFs are built to be tax efficient and, as such, should also be evaluated on their tax efficiency.
• The last information that investor must find is the risk involved. Is it likely to be close or has counter party risk involved with it etc.

The main thing in considering the QQQ performance is comparing the trading fees of one investment with the other one.

Who can invest in QQQ ETF?

If you're an investor with a keen interest in technology, it's only natural to take a look at exchange-traded funds (ETFs) that track the NASDAQ. The technology sector is historically volatile compared with the NYSE, and NASDAQ stocks exhibit about 35% more volatility. But volatility can also mean high growth potential and the accompanying financial reward.