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When Quality Matters, Turn to this ETF

BY | ETF Database
6:07 am ET 08/04/26 | 34 VIEWS
Among the various investment factors, quality rarely gets the same attention as growth, size, or value. However, focusing on quality over long-term holding periods quietly delivers outsized benefits.Just look at the Invesco S&P 500 Quality ETF (SPHQ B). Over the decade ending July 31, the $19.1 billion SPHQ nearly quadrupled in value. Over the past three years, it sported slightly lower annualized volatility than the largest S&P 500 ETF. The latter point highlights the advantages built into its underlying benchmark — the S&P 500 Quality Index. “This underscores what makes the S&P 500® Quality Index particularly interesting: it hasn’t just outperformed the S&P 500 over the long term, but it has done so with lower risk, greater consistency and resilience during periods of market stress,” according to S&P Dow Jones Indices. “Much of S&P 500 Quality Index’s outperformance has come from its ability to participate in most of the S&P 500’s upside while limiting losses during market downturns.”SPHQ a Solid Long-Term BetSPHQ, which turns 21 years old in December, has a wide audience. The ETF is particularly pertinent to advisors and investors seeking more bull-market upside than low-volatility funds offer. At the same time, it still maintains favorable volatility characteristics to keep overall risk in check. “For more than three decades — including both live and back-tested performance — the S&P 500 Quality Index has outperformed the S&P 500 on a nominal basis by an annualized average of 285 basis points,” added S&P. “Notably, its 14.13% annualized performance exceeded its volatility of 14.11%, resulting in a risk-adjusted ratio of 1.00 — 33% higher than the S&P 500’s already strong 0.75.” Home to 101 stocks, SPHQ is sector-agnostic, but focuses on three primary gauges of quality: return on equity, accruals ratio, and financial leverage ratio. Through this process, the fund invests nearly 75% of its portfolio in technology, industrial, and financial services stocks. Year to date, the Invesco ETF is handily outperforming the S&P 500, beating the largest ETF tracking the index by 330 basis points as of July 31. However, investors should primarily focus on the long-term perks offered by this fund. “Its long-term outperformance — both absolute and risk-adjusted — is only part of the story; equally important are its lower risk — reflected in lower volatility, drawdowns and capture ratios — consistency and resilience during past periods of economic stress. It’s the distinctive combination of these attributes that sets the S&P 500 Quality Index apart,” concluded S&P. For more news, information, and analysis, visit the Innovative ETFs Content Hub. Invesco Distributors, Inc. 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 Invesco Distributors, Inc., 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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