Yahoo Finance Is iShares MSCI USA Quality Factor ETF (QUAL) a Strong ETF Right Now?
The iShares MSCI USA Quality Factor ETF (QUAL) 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?
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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by Blackrock. It has amassed assets over $41.39 billion, making it one of the largest ETFs in the Style Box - All Cap Blend. This particular fund seeks to match the performance of the MSCI USA Sector Neutral Quality Index before fees and expenses.
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.
With one of the cheaper products in the space, this ETF has annual operating expenses of 0.15%.
The fund has a 12-month trailing dividend yield of 1.15%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For QUAL, it has heaviest allocation in the Information Technology sector --about 30.60% of the portfolio --while Financials and Healthcare round out the top three.
When you look at individual holdings, Nvidia Corp (NVDA) accounts for about 6.83% of the fund's 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
Year-to-date, the iShares MSCI USA Quality Factor ETF has added roughly 7.34% so far, and it's up approximately 27.45% over the last 12 months (as of 04/25/2024). QUAL has traded between $121.98 and $165.44 in this past 52-week period.
The fund has a beta of 1.03 and standard deviation of 18.42% 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 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) 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 $52.34 billion in assets, Vanguard Total Stock Market ETF has $375.63 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
