The iShares MSCI USA Quality Factor ETF (QUAL) and the iShares MSCI ACWI ETF (ACWI) are both among the Top 100 ETFs. QUAL is a iShares Large Blend fund and ACWI is a iShares N/A fund. So, what’s the difference between QUAL and ACWI? And which fund is better?
The expense ratio of QUAL is 0.17 percentage points lower than ACWI’s (0.15% vs. 0.32%). QUAL also has a higher exposure to the technology sector and a lower standard deviation. Overall, QUAL has provided higher returns than ACWI over the past 7 years.
In this article, we’ll compare QUAL vs. ACWI. We’ll look at industry exposure and fund composition, as well as at their holdings and portfolio growth. Moreover, I’ll also discuss QUAL’s and ACWI’s performance, risk metrics, and annual returns and examine how these affect their overall returns.
|Name||iShares MSCI USA Quality Factor ETF||iShares MSCI ACWI ETF|
The iShares MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.
QUAL’s dividend yield is 0.10% lower than that of ACWI (1.29% vs. 1.39%). Also, QUAL yielded on average 3.21% more per year over the past decade (13.42% vs. 10.21%). The expense ratio of QUAL is 0.17 percentage points lower than ACWI’s (0.15% vs. 0.32%).
The iShares MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.
QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.
The iShares MSCI ACWI ETF (ACWI) has the most exposure to the Technology sector at 20.41%. This is followed by Financial Services and Consumer Cyclical at 15.58% and 12.01% respectively. Real Estate (2.75%), Energy (3.48%), and Basic Materials (4.73%) only make up 10.96% of the fund’s total assets.
ACWI’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Healthcare, and Consumer Cyclical stocks at 7.15%, 9.65%, 9.87%, 11.74%, and 12.01%.
QUAL is 2.11% more exposed to the Technology sector than ACWI (22.52% vs 20.41%). QUAL’s exposure to Financial Services and Healthcare stocks is 0.29% higher and 1.48% higher respectively (15.87% vs. 15.58% and 13.22% vs. 11.74%). In total, Basic Materials, Utilities, and Real Estate also make up 2.61% less of the fund’s holdings compared to ACWI (7.48% vs. 10.09%).
|Facebook Inc Class A||4.77%|
|Nike Inc Class B||4.05%|
|Johnson & Johnson||2.99%|
|Mastercard Inc Class A||2.72%|
|Alphabet Inc Class A||2.49%|
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
|Facebook Inc A||1.25%|
|Alphabet Inc Class C||1.12%|
|Alphabet Inc A||1.09%|
|Taiwan Semiconductor Manufacturing Co Ltd||0.79%|
|JPMorgan Chase & Co||0.71%|
ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.
Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.
The iShares MSCI USA Quality Factor ETF (QUAL) has a Beta of 0 with a Alpha of 0 and a Mean Return of 0. Its Sharpe Ratio is 0 while QUAL’s Standard Deviation is 0. Furthermore, the fund has a Treynor Ratio of 0 and a R-squared of 0.
The iShares MSCI ACWI ETF (ACWI) has a Alpha of 0.15 with a Beta of 1 and a Standard Deviation of 14.05. Its Treynor Ratio is 9.45 while ACWI’s Sharpe Ratio is 0.71. Furthermore, the fund has a R-squared of 99.96 and a Mean Return of 0.89.
QUAL’s Mean Return is 0.89 points lower than that of ACWI and its R-squared is 99.96 points lower. With a Standard Deviation of 0, QUAL is slightly less volatile than ACWI. The Alpha and Beta of QUAL are 0.15 points lower and 1.00 points lower than ACWI’s Alpha and Beta.
QUAL had its best year in 2019 with an annual return of 34.14%. QUAL’s worst year over the past decade yielded -5.77% and occurred in 2018. In most years the iShares MSCI USA Quality Factor ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 5.56%, and 9.18% respectively.
The year 2019 was the strongest year for ACWI, returning 26.7% on an annual basis. The poorest year for ACWI in the last ten years was 2018, with a yield of -9.15%. Most years the iShares MSCI ACWI ETF has given investors modest returns, such as in 2016, 2010, and 2012, when gains were 8.22%, 12.31%, and 15.99% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in QUAL would have resulted in a final balance of $23,251. This is a profit of $13,251 over 7 years and amounts to a compound annual growth rate (CAGR) of 13.42%.
With a $10,000 investment in ACWI, the end total would have been $18,413. This equates to a $8,413 profit over 7 years and a compound annual growth rate (CAGR) of 10.21%.
QUAL’s CAGR is 3.21 percentage points higher than that of ACWI and as a result, would have yielded $4,838 more on a $10,000 investment. Thus, QUAL outperformed ACWI by 3.21% annually.
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