A Smart Beta ETF Without the Steep Expense Ratios | ETF Trends

Investors looking to get into smart beta funds that implement a factor strategy might be put off usual premium prices. If so, they haven’t checked out the Xtrackers Russell 1000 US QARP ETF (QARP), especially when it comes to getting exposure to value and quality factors.

QARP seeks investment results that correspond generally to the performance, before fees and expenses, of the Russell 1000 2Qual/Val 5% Capped Factor Index (the “underlying index”). The fund will invest at least 80% of its total assets (but typically far more) in component securities of the underlying index.

The underlying index is designed to track the equity market performance of companies in the United States selected on the investment style criteria (“factors”) of quality and value.

How reasonable is QARP? The fund has a low 0.19% expense ratio in a market where smart beta funds can usually come in with a hefty price tag.

The fund is up 12.3% thus far according to Morningstar performance numbers. The previous year, the fund was up 30%.

As more investors cycle out of technology names and into quality or value, QARP has been a beneficiary of that rotation. The fund bumped past its 50-day moving average in November, buoyed by positivity surrounding a vaccine and new incoming presidential administration.

QARP Chart

With Investing, Patience is Key

Like the traits of many great investors, patience is always key. ETF investors looking for quality names can get it all in one ETF wrapper via QARP, the patience piece is on them.

“The biggest and best gains are generally achieved by stepping into quality names and then letting time do most of the work,” a Star Herald article said. “Most of us should be willing to make a five-year commitment to a stock if we’re willing to own it for even a day. Most of us, however, simply don’t have the discipline to do that.”

“By the way, Peter Lynch has seen the power of patience play out in his favor many times.” the article noted further. “Perhaps the biggest payback for his discipline was served up by Lukens Steel. It gained around 500% for the Magellan fund in just one year, but it wasn’t until the 15th year the fund owned the company.”

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