QTEC is up 23.6% year-to-date, slightly ahead of QQQ, but QTEC has also been more volatile than its cap-weighted counterpart. QTEC allocates nearly 70% of its combined weight to semiconductor and software stocks. Internet and computer names combine for another 24%. Investors should note that since QTEC excludes consumer discretionary and healthcare names, among others, it does not hold 100 stocks. Rather, this ETF is home to just 34 components.
“So QTEC deals with big firms but rebalances the total amount held in each one by regressing each to the mean of just under 3% every quarter. Regression to the mean could hurt performance relative to an individual stock like Apple but it also means it is regularly buying low and selling high, albeit in small bites of the elephant each time,” notes Seeking Alpha.
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Tom Lydon’s clients own shares of Apple, Facebook and QQQ.