Making its debut on 09/12/2016, smart beta exchange traded fund Fidelity Quality Factor ETF (FQAL Quick QuoteFQAL - Free Report) provides investors broad exposure to the Style Box - Large Cap Blend category of the market.

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.

A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

FQAL is managed by Fidelity, and this fund has amassed over $1.06 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Blend. FQAL, before fees and expenses, seeks to match the performance of the Fidelity U.S. Quality Factor Index.

The Fidelity U.S. Quality Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies with a higher quality profile than the broader market.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.16%, making it one of the cheaper products in the space.

It's 12-month trailing dividend yield comes in at 1.20%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Representing 31.9% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Consumer Discretionary round out the top three.

Taking into account individual holdings, Nvidia Corp (NVDA) accounts for about 7.55% of the fund's total assets, followed by Microsoft Corp (MSFT) and Apple Inc (AAPL).

FQAL's top 10 holdings account for about 36.43% of its total assets under management.

Performance and Risk

So far this year, FQAL has added about 9.64%, and was up about 18.94% in the last one year (as of 07/28/2025). During this past 52-week period, the fund has traded between $57.29 and $71.33.

The ETF has a beta of 0.97 and standard deviation of 16.13% for the trailing three-year period. With about 131 holdings, it effectively diversifies company-specific risk .

Alternatives

Fidelity Quality Factor ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.

SPDR S&P 500 ETF (SPY) tracks S&P 500 Index and the Vanguard S&P 500 ETF (VOO) tracks S&P 500 Index. SPDR S&P 500 ETF has $655.33 billion in assets, Vanguard S&P 500 ETF has $703.83 billion. SPY has an expense ratio of 0.09% and VOO changes 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 - Large 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.