The Fidelity Quality Factor ETF (FQAL) was launched on 09/12/2016, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $1.18 billion, this makes it one of the larger ETFs in the Style Box - Large Cap Blend. FQAL is managed by Fidelity. This particular fund 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.
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.
Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.
FQAL's 12-month trailing dividend yield is 1.10%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
FQAL's heaviest allocation is in the Information Technology sector, which is about 31.6% of the portfolio. Its Financials and Healthcare round out the top three.
Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 7.4% of total assets, followed by Apple Inc (AAPL) and Microsoft Corp (MSFT).
Its top 10 holdings account for approximately 40.22% of FQAL's total assets under management.
Performance and Risk
The ETF has gained about 1.91% and is up about 14.09% so far this year and in the past one year (as of 02/09/2026), respectively. FQAL has traded between $57.29 and $77.27 during this last 52-week period.
The fund has a beta of 0.97 and standard deviation of 13.82% 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 $762.78 billion in assets, Vanguard S&P 500 ETF has $860.86 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
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 ReportsThis article originally published on Zacks Investment Research (zacks.com).
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