Major Overhaul: Nasdaq 100 Equal-Weight ETF Slices Holdings in Half, Embracing a New Selective Strategy

The Nasdaq-100, a benchmark synonymous with technological innovation, carries a not-so-secret vulnerability: its staggering reliance on a handful of behemoths. With the top three constituents alone commanding over 20% of the index, a stumble in mega-cap tech can send shockwaves through the entire market.

For years, the Invesco NASDAQ-100 Equal Weight ETF (QQEW) has offered a counter-narrative, distributing assets evenly across all index members to dilute this concentration risk. Now, the fund is rewriting its own playbook. In a significant restructuring effective late December 2025, QQEW has transitioned from holding every Nasdaq-100 company to a more curated portfolio of just 50 firms, selected based on proprietary quality and growth metrics.

"This isn't an abandonment of the equal-weight philosophy, but an evolution of it," explained a fund strategist familiar with the change. "We're applying a quality screen to identify stronger candidates, but once selected, each company receives the same allocation—roughly 2%. This maintains the democratic exposure while potentially enhancing the portfolio's resilience."

The core appeal of equal-weighting remains its power to democratize the index. In a traditional cap-weighted fund like the Invesco QQQ Trust (QQQ), giants like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) dominate performance. QQEW's structure, however, gives innovators like Micron Technology (NASDAQ:MU) and Intuitive Surgical (NASDAQ:ISRG) an equal voice in driving returns, transforming the investment from a bet on a few titans into a broader wager on Nasdaq-wide growth.

This strategy, however, involves calculated trade-offs. The fund's 12.4% return over the past year notably trailed the cap-weighted index, a period marked by intense mega-cap outperformance. Equal-weighting inherently sacrifices some upside during phases of narrow market leadership. The long-term view is more nuanced, with QQEW having delivered robust absolute returns over the past decade, often with reduced volatility during sector rotations.

Investors also pay a premium for this diversification. QQEW's expense ratio of 0.55% is substantially higher than QQQ's 0.18%, a cost differential that compounds over time. Furthermore, its minimal 0.27% dividend yield offers little solace for income-focused portfolios.

Analyst & Investor Reactions:

"A prudent mid-course correction," says Michael Chen, portfolio manager at Horizon Advisors. "The pure equal-weight model was becoming inefficient with over 100 holdings. This selective approach sharpens the fund's focus on quality while preserving its core diversification benefit. It's a smarter tool for investors seeking Nasdaq exposure without the extreme top-heaviness."

"So much for 'equal weight'!" retorts Sarah Gibson, an independent retail investor and frequent financial commentator. "They've literally cut out half the index. This feels like a bait-and-switch—marketing one strategy and delivering another. Are we paying 0.55% for active management now? Just call it a 'Nasdaq 50 Select ETF' and drop the pretense."

"The timing is analytically sound," notes David Park, a research analyst at Finley Capital. "With valuations stretched at the mega-cap level and potential regulatory headwinds, broadening exposure within the Nasdaq ecosystem is a defensive move. This restructured QQEW could outperform if we see a sustained rotation into mid-cap tech."

The move underscores a broader debate in passive investing: the quest for the optimal balance between pure, low-cost replication and intelligently designed, rules-based strategies that seek to manage inherent index risks. For investors skeptical of perpetual mega-cap dominance and willing to pay a higher fee for structured diversification, the new QQEW presents a compelling, if evolved, proposition.