Yahoo Finance Is iShares MSCI USA Quality Factor ETF (QUAL) a Strong ETF Right Now?
A smart beta exchange traded fund, the iShares MSCI USA Quality Factor ETF (QUAL) debuted on 07/16/2013, and offers broad exposure to the Style Box - All Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
QUAL is managed by Blackrock, and this fund has amassed over $46.65 billion, which makes it one of the largest ETFs in the Style Box - All Cap Blend. QUAL, before fees and expenses, seeks to match the performance of the MSCI USA Sector Neutral Quality Index.
The MSCI USA Sector Neutral Quality Index is based on a traditional market capitalization-weighted parent index, the MSCI USA Index which includes U.S. large and mid capitalization stocks.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.
QUAL's 12-month trailing dividend yield is 1.03%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
QUAL's heaviest allocation is in the Information Technology sector, which is about 28.40% of the portfolio. Its Healthcare and Financials round out the top three.
Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 6.83% of total assets, followed by Visa Inc Class A (V) and Meta Platforms Inc Class A (META).
The top 10 holdings account for about 40.18% of total assets under management.
Performance and Risk
The ETF has added roughly 17.53% and it's up approximately 31.76% so far this year and in the past one year (as of 06/26/2024), respectively. QUAL has traded between $127.66 and $173.19 during this last 52-week period.
The fund has a beta of 1.03 and standard deviation of 18.34% for the trailing three-year period, which makes QUAL a medium risk choice in this particular space. With about 129 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares MSCI USA Quality Factor ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $56.97 billion in assets, Vanguard Total Stock Market ETF has $407.50 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Blend.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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iShares MSCI USA Quality Factor ETF (QUAL): ETF Research Reports
Visa Inc. (V) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports
Meta Platforms, Inc. (META) : Free Stock Analysis Report
