Getting quality at a low cost can be a challenging endeavor when it comes to any product or service. In the world of ETFs, look no further than the iShares MSCI USA Quality Factor ETF (QUAL) with its microscopic 0.15% expense ratio.
QUAL seeks to track the investment results of the MSCI USA Sector Neutral Quality Index composed of U.S. large- and mid-capitalization stocks with quality characteristics as identified through certain fundamental metrics. The fund generally will invest at least 90% of its assets in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents.
The index is based on a traditional market capitalization-weighted parent index, the MSCI USA Index. Overall, the fund gives investors:
- Exposure to large- and mid-cap U.S. stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth, and low financial leverage)
- Index-based access to a specific factor which has historically driven a significant part of companies’ risk and return
- Use to help manage exposure and risk within a stock allocation
As the market recovers, QUAL has been on a steady climb higher, moving past its 50-day moving average lately with the tailwinds of a vaccine. In terms of an entry point, the fund is heading towards its overbought level, so a possible buying opportunity could be forthcoming if a year-end sell-off takes place.
It’s Quality Time for the Markets
The rotation from growth to quality has been apparent in QUAL’s 6-month chart above as it continues to climb from its March sell-off levels. Slow and steady wins the race, and in this time of market uncertainty, investors must maintain their patience.
“History tells us that markets do recover over time,” said Jason Field, CFP, a financial advisor at Van Leeuwen & Company, in a CNBC report. “When markets do go down, it does provide an opportunity to buy good-quality investments at lower prices.”
Staying invested is crucial. As the article states, “some investors were able to pick up on this amid the coronavirus pandemic market rout, according to Phuong Luong, CFP and founder of Just Wealth.”
“People are understanding better about the value of long-term investing and staying the course and that the risk of being in the market over time decreases,” said Luong.
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