Smart Beta: Quality ETFs

In the seventh in our series explaining the different styles investors can add to their portfolios through strategic beta ETFs, Monika Dutt talks quality investing

Monika Dutt 10 January, 2018 | 9:00AM

 

 

Monika Dutt: Quality is a fuzzy factor. There is no one definition for quality, nor is there clear consensus that it is a true stand-alone factor. Typically, a quality company is more profitable, financially healthy and offers stable earnings over time relative to its average competitor. These tend to be mature businesses with sustainable competitive advantages like Microsoft, Unilever and AstraZeneca.

Research suggests that stocks with higher-quality characteristics have historically offered better risk-adjusted returns than lower-quality stocks.

Investors considering quality-focused funds are best advised to check valuations before making their portfolio selection decision. Quality stocks tend to come at a premium and they are not necessarily good investments at any price.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Monika Dutt  is a Passive Strategies Research Analyst for Morningstar Europe