2025 has provided investors with plenty of uncertainty to digest. From tariffs driving significant market selloffs to potential geopolitical shifts, to stubborn inflation and reduced rate cuts, plenty of risks remain on the table. Despite that, many investors still want to be invested, especially those getting close to a major goal, like retirement. Fixed income offerings can help, but many investors don’t want a 100% fixed income portfolio. That’s where quality investing comes in.
See more: Upside & Diversification: The Continued Case for Midcap Investing
Quality investing emphasizes companies with strong balance sheets, durability amid downturns, and other strong fundamentals. Quality definitions can differ, of course, but firms fitting the category tend to meet some solid thresholds.
As uncertainty grows and looms over markets, quality names can help. Strong balance sheets can help a firm deal with tariffs, for example, while a sustainable competitive advantage could help others provide durable returns.
The Fidelity Quality Factor ETF (FQAL ) provides one notable option. The fund charges a 16 basis point (bps) fee to track the Fidelity U.S. Quality Factor Index. It looks for firms with a higher degree of profitability, balance sheet health, and stable cash flows. Intended as a strong addition to a core set of holdings, FQAL has returned 13.5% over the last year, outpacing the S&P 500 as of March 11, per YCharts data.
The quality investing ETF holds some of the so-called Magnificent Seven, but also some other firms outside of tech. For example, the fund invests in firms like Lowe’s Companies (LOW) and Procter & Gamble Company (PG), which represent two recognizable firms. PG has returned 5.7% YTD per YCharts, with a solid 24.99 forward P/E ratio. LOW, meanwhile, has beaten the S&P 500 by about 3% YTD, per YCharts data as of March 11.
A quality investing approach could offer a compelling case in an uncertain 2025. For those investors on the lookout, FQAL could provide that option.
For more news, information, and analysis, visit the ETF Investing Channel.
Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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