Well, it's official: The Nasdaq Composite has entered bear territory. A bear market occurs when a major index drops over 20% from recent highs, and that's precisely what has happened with the Nasdaq Composite, which is down around 24% from its Dec. 16 high.
The index was already having a rough 2025, but it was sent plunging after President Donald Trump announced his new tariff plan on April 2. The new tariffs, which affect imports from around 180 countries, will raise costs on lots of goods, including key products from countries that top companies in the tech-heavy Nasdaq Composite rely on.
Although the index is in a bear market, that doesn't mean investors should avoid it. There are still ways to have it set up long-term investors nicely. One of them is an exchange-traded fund (ETF): the Direxion Nasdaq-100 Equal Weighted Index ETF (QQQE +1.13%).
What differentiates this ETF from other Nasdaq ETFs
This ETF doesn't include every stock in the Nasdaq Composite. However, it does work off the Nasdaq-100, a subset that contains the 100 largest nonfinancial companies listed on the exchange.
The Direxion ETF stands out because it's equal-weighted instead of market cap-weighted like many other Nasdaq ETFs. This means investments are spread virtually equally among all companies in the Nasdaq-100 instead of larger companies receiving more of the investment and having a larger influence on the movement of ETFs.
Megacap tech stocks -- and the "Magnificent Seven" in particular -- make up the vast majority of the standard Nasdaq-100. In fact, the seven stocks (Apple, Nvidia, Microsoft, Amazon, Meta Platforms, Alphabet, and Tesla) account for over 45% of the index. As they go, so goes the index, for better or worse.
^NDX data by YCharts. Percentages from Jan. 1 to April 7.
This ETF relies less on the tech sector's performance
With a handful of tech stocks making up a large chunk of the Nasdaq-100, it's no surprise that the tech sector is heavily represented in the index.
Tech is still the largest sector in the equal-weight ETF, but it's much less than with the standard index. Below are the sectors and how much they account for in each:
| Sector | Percentage of Equal-Weight Nasdaq-100 | Percentage of Standard Nasdaq-100 |
|---|---|---|
| Information technology | 40.65% | 51.29% |
| Communication services | 9.98% | 15.11% |
| Consumer discretionary | 12.01% | 14.73% |
| Consumer staples | 7.09% | 5.48% |
| healthcare | 10.15% | 4.98% |
| Industrials | 10.96% | 4.61% |
| Materials | 1.00% | 1.27% |
| Utilities | 4.05% | 1.24% |
| Energy | 2.10% | 0.56% |
| Financial | 0.99% | 0.54% |
| Real estate | 1.01% | 0.19% |
Source: Direxion. Percentages as of Dec. 31, 2024.
The tech sector has been the most rewarding over the past couple of decades, but you never want to lose sight of the importance of diversification. Many other indexes, like the S&P 500, are already tech-heavy at the top, so investing in the standard Nasdaq-100 could make your portfolio a little too tech-leaning.
Tech stocks tend to do well when the economy is expanding. However, they can be a liability when the economy is in a downturn and recessions (or recession fears) lead investors to favor dividend and value stocks.
This ETF gives you a bit of both. You still get exposure to big-name tech stocks and benefit from growth periods, but you also avoid overconcentration, and you cushion the potential blow of a tech industry stumble.
A history of long-term returns
This ETF hit the market in March 2012 and has produced good returns in the 13 years since.
QQQE data by YCharts. Gray area represents a recession period.
Averaging 11% annual returns over a 13-year period (outperforming the S&P 500 in that span) is impressive for a diversified ETF. By no means does this mean the ETF will continue at this pace, but it does show how being equal-weight focused doesn't take away from its growth potential.
I wouldn't make the Direxion Nasdaq-100 Equal Weighted Index ETF the bulk of my portfolio, but it can be a good supplemental piece to help reduce concentration risk and give you exposure to the broader Nasdaq-100 index.
