Should Fidelity Quality Factor ETF (FQAL) Be on Your Investing Radar?

Launched on 09/12/2016, the Fidelity Quality Factor ETF (FQAL) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Blend segment of the US equity market.

The fund is sponsored by Fidelity. It has amassed assets over $646.82 million, making it one of the larger ETFs attempting to match the Large Cap Blend segment of the US equity market.

Why Large Cap Blend

Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

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 this ETF are 0.15%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.32%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 27.90% of the portfolio. Healthcare and Financials round out the top three.

Looking at individual holdings, Apple Inc (AAPL) accounts for about 7.53% of total assets, followed by Microsoft Corp (MSFT) and Alphabet Inc Cl A (GOOGL).

The top 10 holdings account for about 31.71% of total assets under management.

Performance and Risk

FQAL seeks to match the performance of the Fidelity U.S. Quality Factor Index before fees and expenses. 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.

The ETF has added roughly 2.61% so far this year and is up about 21.36% in the last one year (as of 02/22/2024). In the past 52-week period, it has traded between $44.73 and $56.40.

The ETF has a beta of 0.98 and standard deviation of 17.12% for the trailing three-year period. With about 133 holdings, it effectively diversifies company-specific risk.

Alternatives

Fidelity Quality Factor ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FQAL is a good option for those seeking exposure to the Style Box - Large Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 ETF (SPY) track a similar index. While iShares Core S&P 500 ETF has $432.26 billion in assets, SPDR S&P 500 ETF has $488.15 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

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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Fidelity Quality Factor ETF (FQAL): ETF Research Reports

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

SPDR S&P 500 ETF (SPY): ETF Research Reports

Alphabet Inc. (GOOGL) : Free Stock Analysis Report

iShares Core S&P 500 ETF (IVV): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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