“Nothing succeeds like failure,” writes Floyd Norris in today’s New York Times.

“The exchange-traded fund based on the Nasdaq 100 stock index was a big success when it was introduced in 1999, exactly one year before the Nasdaq stock market peaked. Billions of dollars poured into the fund, popularly known as the QQQ after its ticker symbol.”

“Then, the Nasdaq market fell drastically. But QQQ shares became even more popular.”

“So far this year, the Nasdaq 100-stock index has fallen 30 percent. But the number of QQQ shares outstanding has leaped 41 percent. Compared with the Nasdaq peak in 2000, the index is down 65 percent, and the number of QQQ shares has more than quintupled.”

“On a typical day, $3.1 billion of QQQ’s trade, about twice the volume of the next most popular exchange-traded fund, the Spyders, based on the Standard & Poor’s 500. If the Nasdaq market does come back, there are plenty of people in position to profit from it.”

” ‘Investors are still interested in including technology in their portfolio, and the QQQ’s and Nasdaq 100 funds are a way to do that,’ said Michael Byrum, the chief investment officer of Rydex Funds, which includes a fund that mimics the Nasdaq 100. ‘A lot of people think this is a better time to enter than to exit.’ “

“John L. Jacobs, the Nasdaq official in charge of the QQQ’s, said he thought that investors were ‘looking at the long term’ when they bought QQQ’s. ‘Maybe Nasdaq has hit bottom. If so, you don’t have to pick one stock. You buy a basket and get the benefit,’ he added.”

“Claiming that traders in the QQQ’s are thinking of the long term may be a bit of a stretch. Last month, total volume came to almost three times the number of shares outstanding — an indication that many traders are moving in and out rapidly. That ratio is far greater than for any large stock, let alone for most mutual funds. But the ratio was more than seven back in March 2000, when the Nasdaq peaked.”

“Yesterday, Nasdaq announced its annual rebalancing of the fund, dropping 13 stocks that had plunged in value and adding 13 new ones. But because of the way Nasdaq has gone this year, it did not require a lot of success for the new entrants — just less failure. Six of the companies being added are down this year.”

“The number of QQQ shares outstanding peaked at the end of September, at 666 million. Since then, the index has roared back, rising 46 percent from the September low. But the number of QQQ shares outstanding has declined 8 percent, to 569 million. Just as falling prices seemed to spur interest, the rebound seems to have dampened it a bit.”

“The changes announced yesterday — taking effect next Monday — will give biotechnology a bigger share in the index and cut the portion devoted to telecommunications, an industry that has fallen on hard times this year. But computer equipment and services remain the biggest part of the index, and it promises to remain highly volatile, something that investors seem to love.”