NASDAQ-100 Equal Weighted Index

What Is the NASDAQ-100 Equal Weighted Index

The NASDAQ-100 Equal Weighted Index is a version of the NASDAQ-100 Index. Each of the securities in this market-capitalization-based index is initially set at a weight of 1%. The NASDAQ-100 Equal Weighted Index offers an alternative to market capitalization weighting, which is a more common method of weighting index funds. The equal weighting means that the index's smaller companies contribute as much as its larger companies. The NASDAQ-100 is rebalanced quarterly and is reconstituted annually in December. There are several ETFs that track the movements of the index.

Breaking Down NASDAQ-100 Equal Weighted Index

The Nasdaq 100 Index is composed of assets in various sectors excluding financial services. As of Sept. 7, 2021, a large portion of the index covers the technology sector, which accounts for about 40% of the index's weight. The next largest sector is consumer services, represented by companies like restaurant chains, retailers, and travel services. These stocks account for about 20% of the cap weight thanks to the continued growth of retail giant Amazon (AMZN). Rounding out the index is healthcare, consumer goods, and industrials. The diversity of companies included in the Nasdaq 100 helped drive strong returns for the past two decades. The index is constructed on a modified capitalization methodology, meaning individual weights are according to market capitalization with constraints to limit the influence of the largest companies. To accomplish this, Nasdaq reviews the composition of the index each quarter and adjust weightings if the distribution requirements are not met. 

Criteria for eligibility 

For inclusion in the Nasdaq-100, an index security must be listed exclusively on a Nasdaq exchange. This can include common stocks, ordinary shares, American Depositary Receipts ADRs, and tracking stocks. Other grounds for inclusion comprise market capitalization and liquidity. While there is no minimum requirement for market capitalization, the index itself represents the top 100 largest companies listed on the Nasdaq.

The Nasdaq 100 is traded through the Invesco Trust QQQ, designed to track the performance of the 100 largest companies on the Nasdaq exchange. Each company in the trust must be a member of the Nasdaq 100 and be listed on the broader exchange for at least two years. Some exceptions are made for newly public companies that have extremely high market capitalizations. In addition, listed stocks need to have an average daily trading volume of 200,000 and publicly report earnings quarterly and annually. Companies with bankruptcy issues are omitted from the Invesco Trust QQQ. On occasion, the composition of the trust may not identically match the Index, but the main objective of the QQQ is still to track the price and performance of the underlying index.

Article Sources

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  1. Nasdaq Global Indexes. "NASDAQ-100 Equal Weighted (NDXE)." Accessed Sept. 7, 2021.

  2. Nasdaq. "Index Methodology: NASDAQ-100 Index," Pages 1-2. Accessed Sept. 7, 2021.

  3. Nasdaq Global Indexes. "NASDAQ-100 Equal Weighted (NDXE): Industry Breakdown." Accessed Sept. 7, 2021.

  4. Invesco. "Invesco QQQ." Accessed Sept. 7, 2021.

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