How FLQM Uses 4 Factors in Mid-Cap Investing | ETF Trends

With big questions about 2023 still looming for investors, investment cases abound for all sorts of approaches, from going all in on dividends to embracing a soft-landing tech rebound. For those who want to maintain some solid equities exposures, but without some of that volatility that may be on the horizon, a multifactor mid-cap ETF like the Franklin U.S. Mid Cap Multifactor Index ETF (FLQM).

Large and “mega-cap” tech firms that were market darlings during the low rate regime have taken serious hits this year as the Fed has raised rates and heady valuations have dropped. Meanwhile, while small caps can excite investors with quick growth, the new rate regime and a looming recession could make for a rocky ride for small caps in the new year.

Mid-cap stocks can present an alternative, “goldilocks” approach for investors with the added benefit of crucial diversification. Representing different parts of the economy, the mid-cap category includes bigger companies that have settled into stable businesses as well as smaller shops that have survived those earlier stages and reached a steady level of operations.

Choosing the right mid-caps becomes an important piece of the puzzle when looking at its diverse names, and that’s where an ETF like FLQM may make an impact.

The multifactor mid-cap ETF tracks the LibertyQ U.S. Mid Cap Equity Index, investing in mid-cap firms based on four different factors including quality, value, momentum, and low volatility, with a tilt towards quality and value. FLQM charges 30 basis points for exposure to around 200 firms.

The strategy has outperformed the ETF Database Category Average and the FactSet Segment Average over one month and three months by at least 110 basis points, while taking in $6.4 million in net inflows over one month. Holding the likes of O’Reilly Automotive, Inc. (ORLY) Motorola Solutions, Inc. (MSI), and the Hershey Company (HSY) all around 1% weight, it also offers an annual dividend yield of 0.95%.

Investors may be on the lookout for the right equities holdings for their portfolios amid uncertainty and a lot of excitement around fixed income offerings and dividends. Those investors may want to keep an eye on a multifactor mid-cap ETF like FLQM.

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