Is Fidelity Quality Factor ETF (FQAL) a Strong ETF Right Now?

Designed to provide broad exposure to the Style Box - Large Cap Blend category of the market, the Fidelity Quality Factor ETF (FQAL) is a smart beta exchange traded fund launched on 09/12/2016.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Because the fund has amassed over $1.15 billion, this makes it one of the larger ETFs in the Style Box - Large Cap Blend. FQAL is managed by Fidelity. FQAL, before fees and expenses, seeks to match the performance of the Fidelity U.S. Quality Factor Index.

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.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.16%, making it one of the cheaper products in the space.

The fund has a 12-month trailing dividend yield of 1.14%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector - about 35.1% of the portfolio. Financials and Healthcare round out the top three.

Taking into account individual holdings, Nvidia Corp (NVDA) accounts for about 8.18% of the fund's total assets, followed by Apple Inc (AAPL) and Microsoft Corp (MSFT).

FQAL's top 10 holdings account for about 39.46% of its total assets under management.

Performance and Risk

So far this year, FQAL has added roughly 16.84%, and was up about 12.41% in the last one year (as of 12/04/2025). During this past 52-week period, the fund has traded between $57.29 and $76.03.

The ETF has a beta of 0.97 and standard deviation of 14.26% for the trailing three-year period. With about 130 holdings, it effectively diversifies company-specific risk .

Alternatives

Fidelity Quality Factor ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.

iShares Core S&P 500 ETF (IVV) tracks S&P 500 Index and the Vanguard S&P 500 ETF (VOO) tracks S&P 500 Index. iShares Core S&P 500 ETF has $733.71 billion in assets, Vanguard S&P 500 ETF has $803.25 billion. IVV has an expense ratio of 0.03% and VOO changes 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 - Large Cap Blend

Bottom Line

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This article originally published on Zacks Investment Research (zacks.com).

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