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Is iShares MSCI USA Quality Factor ETF (QUAL) a Strong ETF Right Now?
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Designed to provide broad exposure to the Style Box - All Cap Blend category of the market, the iShares MSCI USA Quality Factor ETF (QUAL - Free Report) is a smart beta exchange traded fund launched on 07/16/2013.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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
Managed by Blackrock, QUAL has amassed assets over $36.25 billion, making it one of the largest ETFs in the Style Box - All Cap Blend. Before fees and expenses, this particular fund 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.15% for QUAL, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.16%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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 30.30% of the portfolio. Its Healthcare and Financials round out the top three.
Taking into account individual holdings, Nvidia Corp (NVDA - Free Report) accounts for about 6.23% of the fund's total assets, followed by Meta Platforms Inc Class A (META - Free Report) and Visa Inc Class A (V - Free Report) .
The top 10 holdings account for about 39.83% of total assets under management.
Performance and Risk
The ETF has gained about 30.41% so far this year and it's up approximately 28.62% in the last one year (as of 12/22/2023). In the past 52-week period, it has traded between $112.56 and $147.99.
The fund has a beta of 1.02 and standard deviation of 18.63% 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 - Free Report) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI - Free Report) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $48.87 billion in assets, Vanguard Total Stock Market ETF has $343.84 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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Is iShares MSCI USA Quality Factor ETF (QUAL) a Strong ETF Right Now?
Designed to provide broad exposure to the Style Box - All Cap Blend category of the market, the iShares MSCI USA Quality Factor ETF (QUAL - Free Report) is a smart beta exchange traded fund launched on 07/16/2013.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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
Managed by Blackrock, QUAL has amassed assets over $36.25 billion, making it one of the largest ETFs in the Style Box - All Cap Blend. Before fees and expenses, this particular fund 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.15% for QUAL, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.16%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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 30.30% of the portfolio. Its Healthcare and Financials round out the top three.
Taking into account individual holdings, Nvidia Corp (NVDA - Free Report) accounts for about 6.23% of the fund's total assets, followed by Meta Platforms Inc Class A (META - Free Report) and Visa Inc Class A (V - Free Report) .
The top 10 holdings account for about 39.83% of total assets under management.
Performance and Risk
The ETF has gained about 30.41% so far this year and it's up approximately 28.62% in the last one year (as of 12/22/2023). In the past 52-week period, it has traded between $112.56 and $147.99.
The fund has a beta of 1.02 and standard deviation of 18.63% 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 - Free Report) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI - Free Report) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $48.87 billion in assets, Vanguard Total Stock Market ETF has $343.84 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.