The iShares MSCI USA Quality Factor ETF (QUAL) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. QUAL is a iShares Large Blend fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between QUAL and VGK? And which fund is better?
The expense ratio of QUAL is 0.07 percentage points higher than VGK’s (0.15% vs. 0.08%). QUAL also has a higher exposure to the technology sector and a lower standard deviation. Overall, QUAL has provided higher returns than VGK over the past 7 years.
In this article, we’ll compare QUAL vs. VGK. We’ll look at annual returns and industry exposure, as well as at their fund composition and portfolio growth. Moreover, I’ll also discuss QUAL’s and VGK’s performance, holdings, and risk metrics and examine how these affect their overall returns.
|Name||iShares MSCI USA Quality Factor ETF||Vanguard FTSE Europe Index Fund ETF Shares|
|Category||Large Blend||Europe Stock|
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 Vanguard FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.
QUAL’s dividend yield is 1.23% lower than that of VGK (1.29% vs. 2.52%). Also, QUAL yielded on average 6.74% more per year over the past decade (13.42% vs. 6.68%). The expense ratio of QUAL is 0.07 percentage points higher than VGK’s (0.15% vs. 0.08%).
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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 Vanguard FTSE Europe Index Fund ETF Shares (VGK) has the most exposure to the Financial Services sector at 15.85%. This is followed by Industrials and Healthcare at 15.58% and 13.76% respectively. Utilities (3.89%), Energy (4.3%), and Communication Services (5.09%) only make up 13.28% of the fund’s total assets.
VGK’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.67%, 8.3%, 11.39%, 11.6%, and 13.76%.
QUAL is 14.22% more exposed to the Technology sector than VGK (22.52% vs 8.3%). QUAL’s exposure to Financial Services and Healthcare stocks is 0.02% higher and 0.54% lower respectively (15.87% vs. 15.85% and 13.22% vs. 13.76%). In total, Basic Materials, Utilities, and Real Estate also make up 6.65% less of the fund’s holdings compared to VGK (7.48% vs. 14.13%).
|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%.
|ASML Holding NV||2.2%|
|Roche Holding AG||2.13%|
|LVMH Moet Hennessy Louis Vuitton SE||1.58%|
|Novo Nordisk A/S B||1.09%|
VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.
AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.
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The iShares MSCI USA Quality Factor ETF (QUAL) has a R-squared of 0 with a Sharpe Ratio of 0 and a Mean Return of 0. Its Treynor Ratio is 0 while QUAL’s Alpha is 0. Furthermore, the fund has a Beta of 0 and a Standard Deviation of 0.
The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Sharpe Ratio of 0.4 with a Alpha of 0.45 and a R-squared of 92.76. Its Treynor Ratio is 5.12 while VGK’s Beta is 1.06. Furthermore, the fund has a Mean Return of 0.61 and a Standard Deviation of 16.65.
QUAL’s Mean Return is 0.61 points lower than that of VGK and its R-squared is 92.76 points lower. With a Standard Deviation of 0, QUAL is slightly less volatile than VGK. The Alpha and Beta of QUAL are 0.45 points lower and 1.06 points lower than VGK’s Alpha and Beta.
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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 2017 was the strongest year for VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% 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 VGK, the end total would have been $13,060. This equates to a $3,060 profit over 7 years and a compound annual growth rate (CAGR) of 6.68%.
QUAL’s CAGR is 6.74 percentage points higher than that of VGK and as a result, would have yielded $10,191 more on a $10,000 investment. Thus, QUAL outperformed VGK by 6.74% annually.
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