Designed to provide broad exposure to the Style Box - Large Cap Blend category of the market, the Fidelity Quality Factor ETF (FQAL Quick QuoteFQAL - Free Report) is a smart beta exchange traded fund launched on 09/12/2016.

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.

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.

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

Because the fund has amassed over $1.4 billion, this makes it one of the larger ETFs in the Style Box - Large Cap Blend. FQAL is managed by Fidelity. This particular fund, 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

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.

Annual operating expenses for FQAL are 0.15%, which makes it one of the cheaper products in the space.

It's 12-month trailing dividend yield comes in at 1.13%.

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.

For FQAL, it has heaviest allocation in the Information Technology sector --about 35.6% of the portfolio --while Financials and Industrials round out the top three.

Taking into account individual holdings, Nvidia Corp (NVDA) accounts for about 7.6% of the fund's total assets, followed by Apple Inc (AAPL) and Alphabet Inc Cl A (GOOGL).

FQAL's top 10 holdings account for about 36.1% of its total assets under management.

Performance and Risk

So far this year, FQAL has added roughly 7%, and it's up approximately 18.82% in the last one year (as of 06/15/2026). During this past 52-week period, the fund has traded between $67.09 and $81.67.

The ETF has a beta of 0.95 and standard deviation of 13.66% for the trailing three-year period. With about 129 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.

iShares Core S&P 500 ETF (IVV) tracks S&P 500 Index and the Vanguard 500 Index Fund ETF Shares (VOO) tracks S&P 500 Index. iShares Core S&P 500 ETF has $821.9 billion in assets, Vanguard 500 Index Fund ETF Shares has $975.05 billion. IVV has an expense ratio of 0.03% 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.