Index Rebalance to Impact PowerShares QQQ, Apple
A rare index rebalance may trigger a taxable event for holders of PowerShares QQQ.
NASDAQ OMX (NDAQ) announced that it will rebalance its Nasdaq-100 Index, which will have a significant impact on the holdings of the tech-heavy exchange-traded fund PowerShares QQQ (QQQ), which is one of the most traded securities on the planet.
The rebalancing of the benchmark, which will occur at the close of trading April 29, is driven by the continued overweight in the index of Apple (AAPL), which far and away is QQQ's largest holding, at almost 21% of assets. A modified market-cap-weighted index, the Nasdaq-100 Index was created in 1985. By 1998, Microsoft (MSFT) had become such a large part of the index that the Nasdaq made the decision to forcibly lower Microsoft's weighting. Since that time, of course, Apple has grown rapidly (up more than 300% in the past two years), and now its market cap dwarfs that of Microsoft.
Robert Goldsborough does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.