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Is iShares MSCI USA Quality Factor ETF (QUAL) a Strong ETF Right Now?
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The iShares MSCI USA Quality Factor ETF (QUAL - Free Report) made its debut on 07/16/2013, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by Blackrock, and has been able to amass over $36.60 billion, which makes it one of the largest ETFs in the Style Box - All Cap Blend. This particular fund, 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.
It's 12-month trailing dividend yield comes in at 1.16%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 30.60% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Financials round out the top three.
Taking into account individual holdings, Visa Inc Class A (V - Free Report) accounts for about 4.79% of the fund's total assets, followed by Apple Inc (AAPL - Free Report) and Microsoft Corp (MSFT - Free Report) .
QUAL's top 10 holdings account for about 37.51% of its total assets under management.
Performance and Risk
The ETF return is roughly 5.88% and it's up approximately 29.35% so far this year and in the past one year (as of 02/21/2024), respectively. QUAL has traded between $116.27 and $158.16 during this last 52-week period.
The ETF has a beta of 1.03 and standard deviation of 18.54% for the trailing three-year period, making it a medium risk choice in the space. With about 129 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares MSCI USA Quality Factor ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
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 $51.51 billion in assets, Vanguard Total Stock Market ETF has $366.97 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?
The iShares MSCI USA Quality Factor ETF (QUAL - Free Report) made its debut on 07/16/2013, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by Blackrock, and has been able to amass over $36.60 billion, which makes it one of the largest ETFs in the Style Box - All Cap Blend. This particular fund, 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.
It's 12-month trailing dividend yield comes in at 1.16%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 30.60% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Financials round out the top three.
Taking into account individual holdings, Visa Inc Class A (V - Free Report) accounts for about 4.79% of the fund's total assets, followed by Apple Inc (AAPL - Free Report) and Microsoft Corp (MSFT - Free Report) .
QUAL's top 10 holdings account for about 37.51% of its total assets under management.
Performance and Risk
The ETF return is roughly 5.88% and it's up approximately 29.35% so far this year and in the past one year (as of 02/21/2024), respectively. QUAL has traded between $116.27 and $158.16 during this last 52-week period.
The ETF has a beta of 1.03 and standard deviation of 18.54% for the trailing three-year period, making it a medium risk choice in the space. With about 129 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares MSCI USA Quality Factor ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
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 $51.51 billion in assets, Vanguard Total Stock Market ETF has $366.97 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.