If there’s a rub with being heavily allocated to tech — and it’s an admittedly minor one given the sector’s returns — it’s that the group is usually more volatile than the broader market. For example, over the past three years, the tech-heavy Nasdaq 100 Index (NDX) was noticeably more volatile on an annualized basis than the S&P 500.
A new exchange traded fund aims to take some of the turbulence out of tech investing. The Invesco QQQ Low Volatility ETF (QQLV) debuted earlier this month alongside the Invesco Top QQQ ETF (QBIG). Both add to the issuer’s stable of Nasdaq 100-related ETFs.
QQLV follows the Nasdaq Low Volatility Index, which is a gauge comprising the 25 NDX components with the lowest trailing 12-month volatility. That methodology implies the new ETF is a much different mousetrap than the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ) . These ETFs are traditional takes on NDX.
QQLV Different Take on NDX
As noted above, QQLV presents investors with a different approach to the widely observed NDX. Notably, the new ETF allocates just 16.27% of its weight to tech stocks. That’s roughly a third of the tech weights found in QQQ and QQQM. Conversely, QQLV devotes about 52% of its combined weight industrial and consumer staples names. Those groups have track records of being less volatile than tech.
Due to those differences, QQLV can be a complement to tech-heavy exposures such as QQQ/QQQM. On a related note, the new ETF is home to just one of the Magnificent Seven stocks — Microsoft (MSFT). However, that could change over time if other members of that famed cohort exhibit lower volatility traits.
“QQLV is the first ETF in the Invesco QQQ Innovation Suite to offer exposure to low volatility companies in the Nasdaq-100 Index,” according to an Invesco press release. “The passively managed fund tracks the Nasdaq-100 Low Volatility™ [Index®. That index] identifies the least volatile companies over the trailing 12 months within the Nasdaq-100 [Index. And that offers] investors access to growth companies within the Nasdaq-100 Index determined to have lower volatility.”
QQLV can also be paired with QQQ or QQQM. The latter two ETFs are growth-heavy funds. That’s worked well for investors. But as is the case with many low volatility strategies, QQLV has a bit of a value feel. That’s because stocks with that designation represent about a third of the fund’s roster. Large- and midcap-blend names account for over 55% of the QQLV portfolio.
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