As a holder of many Footsie shares myself, I’ve benefitted too from last year’s stratospheric price rises. HSBC, Games Workshop, and Coca-Cola HBC are just a few blue chips I own whose share prices took off in 2025.

Some of these have been millionaire-maker material. A £500 a month investment in Games Workshop shares 10 years ago would have generated £1,005,378, based on capital gains and dividends.

But could investing in a FTSE 100 tracker fund help ISA investors today build a million-pound portfolio? I have my doubts.

Why has the FTSE 100 jumped?

UK large-cap shares have enjoyed a stellar year for various reasons. Demand for FTSE shares soared as global investors sought cheap stocks to buy. They also rose as interest in dividend-paying stocks heated up.

Strength across the financial services, defence, and mining sectors also propelled share prices in 2025. These industries all feature heavily on the index.

For long-term investors, the FTSE 100‘s rise has brought as much relief as it has cause for celebration following years of underperformance.

Over the last 25 years, it’s delivered an average annual return of roughly 7%. That’s far below what it produced last year. And it’s a return that is unlikely to make UK investors into stock market millionaires.

Investing in an ISA

Let’s say we have an ISA investor who’s been investing £500 a month in a FTSE 100 tracker fund. They’ve been doing this for 25 years to build a healthy nest egg for retirement.

Based on the average return over that period, they’d have made £405,036 by the time they retire. That’s not bad. But that’s clearly a long way off a million-pound portfolio.

Past performance isn’t always a reliable guide to future returns, of course. And the FTSE 100 could follow that bumper 2025 with much higher returns from this point on.

Building a £1.3m portfolio

Personally speaking, I think a better way of targeting life-changing wealth is to also invest in high-power US growth shares. It’s a strategy I’ve embraced by buying several S&P 500-focused exchange-traded funds (ETFs), including the iShares Edge USA Quality Factor ETF (LSE:IUQA).

Since its creation almost a decade ago, it’s delivered an average annual return of 14%. If this continues, a £500 monthly investment here over the next 25 years would build an ISA worth £1,347,913.

This fund’s focus on “US companies that have historically experienced strong and stable earnings” has clearly paid off handsomely. With around 35% of its holdings focused on tech stocks, returns have rocketed as this century’s digital revolution has accelerated.

Some of its major holdings today include Apple, Nvidia, and Microsoft. Looking ahead, this provides enormous growth potential as new tech segments like AI, cloud computing, and cybersecurity take off.

That’s not all, as the fund’s exposure to multiple other sectors (including financial services, consumer goods, and telecoms) provides additional growth opportunities as well as diversification benefits.

Like any shares-based ETF, this fund exposes investors to potential stock market volatility. But for investors looking to build substantial wealth in an ISA, I think it’s worth serious consideration.

The post Can you build a million-pound ISA with FTSE 100 shares? appeared first on The Motley Fool UK.

It means that someone who invested £20,000 in 2015 would — if they managed to secure this average — now be sitting on a healthy £52,242. What’s more, thanks to the tax perks of the ISA suite, they wouldn’t have had to pay any tax on capital gains or dividends either.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Yet while this represents a decent return, as an ambitious investor I’ll be hoping my ISA performs better over the next decade and more. With a wealth of shares, trusts and funds to choose from, both from the UK and overseas, I’m optimistic I’ll be able to hit my target.

A winning portfolio?

Here’s just one combination of shares I think could deliver a better-than-average return between now and 2025:

Delivering an average 17.3% yearly return over the last 10 years, a Stocks and Shares ISA comprising these stocks would have turned a £20,000 lump sum at the beginning into £111,428 today. That’s twice the return that the average ISA investor has enjoyed over the same timeframe.

I like this portfolio because it offers incredible diversification that can help investors spread risk while targeting ambitious returns.

Across each of the FTSE 100 shares, investment trusts, and exchange-traded funds (ETFs) it holds, it provides exposure to 225 separate companies. These span both cyclical and non-cyclical sectors and a wide variety of regions, allowing the portfolio to effectively absorb downturns in one business or industry.

Past performance isn’t always a reliable guide to future returns. And there are never any guarantees. But I’m optimistic that — despite the enduring threat of trade tariffs — Games Workshop and BAE Systems will deliver more substantial share price gains as their markets grow.

I’m confident too, that HSBC‘s focus on fast-growing Asian nations could also deliver long-term returns, even though interest rate cuts will squeeze margins.

I’d also back Scottish Mortgage to keep performing strongly as the tech revolution rolls on. That’s despite growing threats from China to key holdings like Nvidia and Tesla rising.

A top ISA pick

Among this grouping, I think iShares Edge USA Quality Factor ETF (LSE:IUQA) may be the best way for ISA holders to consider balancing risk and reward. With holdings in 123 different shares, it provides “direct investment in US companies that have historically experienced strong and stable earnings“.

This fund carries a high weighting of technology stocks such as Microsoft, Nvidia, Apple and Adobe. In total, IT accounts for 30.2% of the ETF, providing investors with exposure to exciting growth sectors including artificial intelligence (AI), cloud computing and robotics.

Other well-represented sectors include financial services, consumer goods, healthcare and telecoms. This could provide the fund with strength if economic conditions worsen and tech spending dips. But at the same time, such a big weighting to tech stocks still means it will suffer if they underperform.

On balance, I think this diversified ETF might be a great one to think about for a winning Stocks and Shares ISA.

The post £20k invested in this Stocks & Shares ISA portfolio 10 years ago would be worth… appeared first on The Motley Fool UK.

Past performance is not a reliable guide to future returns. But the average annual return on the following three ETFs is a whopping 16%.

To put that into context, a £15,000 investment spread equally across them would — after 25 years — turn into £797,608 if their performance remains unchanged.

Quality street

The first fund I’m looking at is the iShares Edge MSCI USA Quality Factor ETF (LSE:IUQA). During the last five years it’s delivered an average annual return of 14.7%.

It has holdings in five of the ‘Magnificent Seven’ tech stocks, namely Alphabet, Apple, Meta, Microsoft, and Nvidia. So it’s soared in value thanks to the buzz around artificial intelligence (AI) and other advancements of the digital revolution.

But this fund is no one-trick pony. Its focus on quality — namely “US companies that have historically experienced strong and stable earnings” — provides exposure to a multitude of robust sectors. Other major holdings include Visa, Eli Lilly, and Costco.

Almost 60% of the fund is tied up in cyclical sectors like information technology, financial, and consumer discretionary. This can create turbulence during downturns. But as we’ve seen, it can also deliver substantial returns over the longer term.

Caffeine fix

Gold’s surge to record highs has dominated commodities chatter during 2024. What’s commanded less attention is the coffee price, which in December also struck all-time peaks.

In fact, prices of coffee beans have been rising sharply over a number of years. So related ETFs like the WisdomTree Coffee (LSE:COFF) fund have subsequently rocketed in value.

Since 2019, this fund — which tracks the Bloomberg Commodity Coffee Subindex 4W Total Return Index — has provided an average yearly return of 20.7%.

A rise in extreme weather events has severely affected harvests of late. With climate change intensifying, supply shortages could become more common and push bean prices even higher.

So I think this Wisdomtree fund’s worth a close look, even though it’s denomination in US dollars, which makes returns vulnerable to exchange rate movements.

A passage to India

My final fund under the spotlight is the Franklin FTSE India ETF (LSE:FLXI). This product — which has holdings in 244 large and mid-capitalisation Indian stocks — provides excellent exposure to Asia’s fastest-growing economy.

During the last five years, it’s delivered an average yearly return of 12.7%.

Like the US iShares fund mentioned above, this Franklin Templeton ETF provides excellent diversification by sector. Major names include HDFC Bank, Infosys, Bharti Airtel, and Hindustan Unilever. So it provides a broad snapshot of Indian society.

On the downside, its focus on India makes the fund more susceptible to regional challenges compared to a globally diversified fund. However, the rate at which the local economy is tipped to grow still makes it an attractive investment to me.

Analysts at S&P, for instance, expect India’s annual GDP growth to average 6.7% between now and 2031.

The post 3 ETFs to consider buying for a 16% average annual return! appeared first on The Motley Fool UK.

In the UK, both dividends and capital gains are taxed. And the amount we have to pay to HMRC is getting larger.

Here’s how I’m hoping to avoid big bills and maximise my passive income.

Rising tax bills

Dividend allowances have fallen sharply in recent years. Investors can now only enjoy £500 in dividends before they have to start paying tax. That’s down from £1,000 last year, £2,000 the year before that, and £5,000 just seven years ago.

And following last week’s Budget, the rate of capital gains tax (CGT) investors must pay has also soared.

For basic-rate taxpayers, the rate has leapt from 10% to 18%. Meanwhile, the rate has increased to 20% to 24% for higher-rate taxpayers. The annual CGT allowance has been frozen at £3,000.

And the tax grabs could continue, as the government seeks to raise much-needed revenues.

ISAs and SIPPs

This is why I invest using only tax-efficient products. With my Self-Invested Personal Pension (SIPP) and Stocks & Shares Individual Savings Account (ISA), I don’t need to pay a penny in capital gains tax or dividend tax.

The amount I can invest in each has an annual limit. This is £20,000 for an ISA, and typically a sum equivalent to my annual income (up to £60,000) for my SIPP.

With my SIPP, I also get tax relief on any contributions I make. This is 20% for basic-rate taxpayers, and 40% and 45% respectively for higher-rate and additional-rate taxpayers respectively.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Over time, using one of these tax-efficient products could save me a fortune. Let’s say that Steve, a higher-rate taxpayer, invested £20,000 a year for 10 years. Over this period, he achieved an average annual return of 8%, giving him a gain of £89,525.

After applying CGT allowances, £59,525 would be subject to capital gains tax. If the CGT rate remained at 24% over the period, he’d pay a total of £14,285 in tax.

However, the cost of these tax bills to Steve would likely be higher. By having less capital in his portfolio, his ability to generate compound gains would be diminished.

A top ETF

With ISAs and SIPPs, investors can also handily invest in a wide range of shares, funds and trusts. One investment that I’ve recently been adding to my own pension is the iShares Edge MSCI USA Quality Factor UCITS ETF (LSE:IUQA).

This exchange-traded fund invests in a selection of stocks “that have historically experienced strong and stable earnings“. It holds a total of 124 companies, in fact, like Nvidia, Apple and Visa, which in turn helps me to spread risk.

Past performance is no guarantee of future returns. And lower growth in the US could impact what I make. But the fund has provided an impressive average annual return of 14.7% since 2016.

If this continues, a £300 monthly investment here in my ISA could turn into £1,113,157 after 25 years. And because I wouldn’t have to pay tax, this would give me a £44,526 annual passive income if I drew down 4% each year.

The post Worried about tax raids? Here’s how I’m targeting a £44,526 passive income with shares appeared first on The Motley Fool UK.

Bumble

What it does: Bumble is an online dating platform that sets itself apart from competitors as women make the first move.

By Muhammad Cheema. It’s easy to be pessimistic about Bumble (NASDAQ:BMBL) shares. They’ve declined by 92% since going public in 2021 and have fallen by 60% in the last year alone. This is mainly because of the slower-than-expected growth. Recently trimming its growth forecast from 8-11% to 1-2% didn’t help.

Don’t get me wrong, there are risks of it fading out if growth doesn’t pick up. But I’m betting it will, so I’ve recently added to my position.

I truly believe that online dating is the future of dating. It’s not my preference, to be honest, but it’s the way the world is trending. Many people are glued to their phones, and meeting people online is becoming more common.

Let’s not forget the company is still growing and is profitable. In fact, in its recent quarterly results, net earnings increased by 306% year-on-year.

Finally, Bumble shares seem oversold to me. They’re now trading at a forward price-to-earnings (P/E) ratio of 8.9. This represents a potential bargain.

Muhammad Cheema owns shares in Bumble.

Hilton Food Group

What it does: FTSE 250 member Hilton Food is a leading “multi-protein” producer with a core focus on meat production.

By Roland Head. Shares in Hilton Food (LSE: HFG) look good value to me after a recent share price correction.

The company’s recent half-year results revealed a mixed picture. Although adjusted pre-tax profit rose by 25% to £33m, sales only rose by 1% on a comparable basis.

What interested me was the improvement in Hilton’s profitability in the UK. Margins in the group’s home market were boosted by its growing seafood business and sales of premium meat products.

Looking further ahead, the firm is set to expand into North America with the opening of a new facility in 2026/27. This is backed by a contract with Walmart Canada.

Hilton has disappointed before and the group’s profits could be hit by consumer downtrading or the loss of a major contract.

However, broker forecasts have been upgraded recently and I think the shares look reasonably valued at current levels. I’ve recently added Hilton Foods to my portfolio.

Roland Head owns shares in Hilton Food.

iShares Edge MSCI USA Quality Factor UCITS ETF

What it does: iShares Edge MSCI USA Quality Factor UCITS ETF invests in US companies that enjoy strong and stable earnings.

By Royston Wild. With an average annual return of 14.72% since it started eight years ago, the iShares Edge MSCI USA Quality Factor UCITS ETF (LSE:IUQA) has been near the top of my shopping list for some time. In recent days I pulled the trigger and finally added it to my portfolio.

As its name implies, the fund provides me with exposure to the strongly performing US stock market. Major holdings here include tech giants Apple and Nvidia, soft drinks maker Coca-Cola, and payment card services providers Visa and Mastercard.

This selection illustrates the ETF’s focus on companies with solid profits records. More specifically, it targets companies that have “[a] high percentage of company earnings allocated to shareholders; low levels of debt; and low variability of year on year company earnings.”

On the downside, a high concentration of cyclical stocks may leave the fund vulnerable during economic downturns.

Information technology, financial services and consumer discretionary companies alone make up more than 52% of the fund. However, a proven ability to deliver a strong return over time still makes it an attractive investment in my book.

One final thing: with an ongoing charge of just 0.2% per annum, it’s also extremely cost effective.

Royston Wild owns iShares Edge MSCI USA Quality Factor UCITS ETF.

Norfolk Southern

What it does: Norfolk Southern is one of the US Class 1 railroads. It operates on the Eastern side of the country.

By Stephen Wright. Warren Buffett used to own shares in US railroad Norfolk Southern (NYSE:NSC). And since I think there are reasons why this company can do well, I’ve been buying it for my own portfolio. 

Since 2014, the US transportation market has shifted from roughly even between truck and rail to now being 64% trucking. That’s despite trains being cheaper and less carbon-intensive.

The reason is that railroads almost across the board have focused on margins and provided a poor service. But Norfolk Southern is looking to change that, and I expect this to continue even after Alan Shaw’s departure. 

The company has been working on improving its reliability and efficiency in ways that benefit its customers. And I think this means it has a good chance of regaining market share over time. 

The risk is that this approach is going to result in lower margins, which could offset revenue growth. But I think its strategy is the right one and that’s why I’ve been buying the stock.

Stephen Wright owns shares in Norfolk Southern.

Rolls-Royce

What it does: Civil aerospace giant Rolls-Royce manufactures aircraft engines, marine propulsion systems, and power-generation system. It also makes engines for military aircraft, ships and submarines.

By Harvey Jones. When a stock goes gangbusters like Rolls-Royce (LSE:RR.), I get whipped up into a frenzy of fear and greed, just like everybody else.

I was lucky in one respect. I spotted the FTSE 100 group’s recovery potential in October 2022, and bought right at the start of its index-smashing run. Unfortunately, I only invested a small sum, and was left with the sticky decision of whether to buy more as the Rolls-Royce share price flew ever higher.

I held back, knowing sod’s law would strike and the stock would fall as soon as I piled in. I finally gave into FOMO on 1 August, after Rolls-Royce beat first-half guidance and announced the return of its dividend. 

I paid 495p and the stock fell the moment I clicked the ‘buy’ button, exactly as I feared. I averaged down on 6 August at 455p. So far I’m down 3.16% on those trades. Which is a bit rubbish given that Rolls-Royce shares are up 503% off over two years and 113% over one. Timing the market never works. I should stop.

The rapid recovery phase is over but I still expect a steady stream of growth and income over the years. If Rolls-Royce shares dip in the short run, I’ll buy more.

Harvey Jones owns shares in Rolls-Royce.

Taylor Wimpey

What it does: Taylor Wimpey is one of the UK’s largest home builders. In 2023, it completed 10,848 homes. 

By Charlie Keough. I’ve had FTSE 100 housebuilder Taylor Wimpey (LSE: TW.) on my watchlist for some time now. I recently decided to snap up some shares. 

There are a few reasons for this. Firstly, the stock has been soaring. It has climbed 8.6% in 2024 and a whopping 41.6% in the last 12 months. I’m confident it can keep this form up. 

That’s because the current housing shortage should benefit the firm. To fix the issues we’re currently facing, the Labour government has promised to build 1.5m new homes over the next five years. 

That’s not to say I don’t see potential risks with Taylor Wimpey. The housing market has struggled over the past couple of years and any further setbacks would impact its share price. For example, a delay in further interest rate cuts would have negative implications for the business. 

Yet despite potential issues in the months ahead, I couldn’t resist its meaty 5.9% dividend yield. That’s considerably above the Footsie average of 3.9%. 

Charlie Keough owns shares in Taylor Wimpey. 

TripAdvisor

What it does: TripAdvisor runs a digital platform offering a range of travel-related services such as hotel reviews and experiential travel bookings.

By Christopher Ruane. In August, I wrote that I was eyeing buying more TripAdvisor (NASDAQ: TRIP) shares for my portfolio in September. That is exactly what I ended up doing.

The share has lately been trading close to its one year low. As well as a potential bid that never materialised, investors have been concerned about whether a weak economy could dampen travel spending, hurting revenues and profits at TripAdvisor.

But does the company, with strong cashflows, really merit a market capitalisation of under $2bn?

Its brand is unique and ubiquitous, the experience booking offering has seen strong growth and, for now at least, travel demand remains robust.

Yes, it operates in a cyclical business. But I think the business has a strong competitive position for the long term that means it looks cheap at the current price.

So, even though my existing holding showed a loss on paper, I used the price weakness to buy more shares.

Christopher Ruane owns shares in TripAdvisor.

Uber Technologies 

What it does: Uber Technologies is a leading global rideshare and food delivery company.

By Ben McPoland.I recently became a shareholder in Uber Technologies (NYSE: UBER). The previously loss-making firm has reached a point where its massive scale and cost-cutting efforts are translating into profitable growth.

In the first six months of the year, it generated $968m in operating profit. This was a 15-fold increase over last year. Earnings per share growth is expected to exceed 100% over the next couple of years then rise by double-digits after that.

This year, the company partnered with Instacart in the US, enabling the latter’s customers to order from hundreds of thousands of Uber Eats’ restaurant partners.

Looking ahead, the rise of autonomous vehicles (AVs) might pose challenges. Uber has partnered with over 10 AV players, including Waymo and Cruise (subsidiaries of Alphabet and General Motors, respectively). But there remains a long-term risk that these firms use their own consumer apps to poach some of Uber’s customers.

As things stand though, the company appears to have solid growth potential in countries like Spain, Germany, Japan, India and South Korea. It notes that in these places, ‘Uber’ isn’t yet used as a verb.

Ben McPoland owns shares in Uber Technologies.

The post 8 shares that Fools have been buying! appeared first on The Motley Fool UK.

Whether I’m a growth, dividend or value investor, the Footsie offers a wealth of opportunities. And what’s more, the index enjoys high levels of liquidity, allowing investors to buy and sell shares cheaply and easily.

I hold several FTSE 100 stocks including Legal & General, Rio Tinto and Aviva. But more recently, I’ve been looking at exchange-traded funds (ETFs) to make a better return over time.

Past performance isn’t a guarantee of what I could make in the future. But if things continue the way they have been, a regular investment in one or both of these funds could make me a much better return than buying individual UK blue-chip shares.

Making millions

In recent months I’ve added the following ETFs to my Self-Invested Personal Pension (SIPP). As we can see, the returns they’ve delivered comfortably beat what a Footsie-tracking fund has delivered in recent years.

If their average annual performances over the past five years remain the same, a £300 monthly investment in the FTSE 100 tracker would make me £286,794 over 30 years.

That’s not bad. But it pales in comparison to the £875,078 I could have made with the Xtrackers MSCI World Momentum UCITS ETF. This fund tracks the performance of “large and mid-cap companies from global developed markets with high momentum scores“.

That Footsie fund would also make me a fraction of what the iShares Edge MSCI USA Quality Factor UCITS ETF would have. This product — which tracks “US companies that have historically experienced strong and stable earnings” — would have made me a multi-millionaire.

Over 30 years I’d have made a spectacular £2,412,608.

A top tech play

In recent days I’ve actually increased my stake in the latter fund.

One thing investors need to know before buying is it’s deep investment in technology stocks. Almost 30% of it is tied up in information technology businesses like Nvidia, Microsoft, Apple and Meta.

The danger here is that this leaves the fund particularly vulnerable to broader economic conditions. But on the plus side, this tech focus gives investors exposure to hot growth themes like artificial intelligence (AI), quantum computing, renewable energy and autonomous vehicles.

The ETF has produced explosive returns in the past five years thanks to themes such as these. And on balance, it’s looking good to continue delivering the goods as the digital revolution rolls on.

I’m optimistic too, that the fund’s other sectors will thrive as the US and global economies grow over time.

The post I want to beat the FTSE 100. These 2 ETFs might help me do it! appeared first on The Motley Fool UK.

But how much does a investor need to invest to build a magic million-pound portfolio?

The magic number

The answer to this isn’t a simple one. It depends on a variety of factors, including the rate of return I’m seeking. A higher return of, say, 12% will mean I don’t have to invest as much. But targeting a larger return also means I’ll typically be taking a bigger risk with my cash.

But in order to get an idea, let’s use the average return that Stocks and Shares ISA investors have enjoyed over the past decade. This stands at 9.64%, according to financial services provider Moneyfarm.

If I was looking to reach millionaire status after 30 years of investing, I’d need to invest exactly £478 each month based on this figure. A breakdown of total deposits and earned interest over the period can be seen below.

Tax boost

Past performance is no guarantee of future returns, of course. I may find myself making a sub-9.64% return over the long term. With a bit of luck, I may even beat that figure.

But I’m boosting my chances of hitting that million-pound target straight away by using a Stocks and Shares ISA. This way I don’t have to pay the taxman a penny on any capital gains or dividends I receive.

Over time, this can add up to a significant chunk of cash. Asset manager Netwealth reckons an additional rate taxpayer investing £100,000 in an ISA would save £44,000 in taxes over a decade. That’s based on a 5.9% average annual return, and excludes broker fees.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Two top tips…

There are other important things I can do to try and reach millionaire status. One is to reinvest any dividends I receive, allowing me to earn money on this ‘interest’ alongside my initial capital.

As I buy more and more shares, which in turn gives me an increasing number of dividends, a snowball effect’s created that can supercharge the size of my portfolio over time. This mathematical miracle is known as compounding.

The other thing I’d do is invest in a wide range of shares, exchange-traded funds (ETFs), and other assets. Spreading my money across asset classes, sectors, and geographies gives me exposure to different investment opportunities and also spreads risk.

… and one great ETF

A fund like the iShares Edge MSCI USA Quality Factor UCITS ETF (LSE:IUQA) could help me achieve this in an easy and cost-effective way. This particular product invests in 125 US companies that have great records of generating strong and stable earnings.

Major names it holds include microchip manufacturer Nvidia, pharmaceuticals giant Eli Lilly, retailer Costco and credit card provider Visa.

Its narrow focus on US shares could create problems if sentiment towards the Stateside stock market deteriorates. But, on balance, I think it’s still worth a close look.

This quality factor fund’s delivered an average annual return of 14.39% since its inception in 2016. If this continues, a £478 monthly investment here could help me hit millionaire status much sooner.

The post How much do I need to invest to become a Stocks & Shares ISA millionaire? appeared first on The Motley Fool UK.

It’s been difficult to outperform the S&P 500 however, as it’s soared due to big gains from mega-cap tech stocks.

There are some products that have managed to beat the S&P over this timeframe though. Here’s a look at one exchange-traded fund (ETF) that’s generated higher returns than the US index.

Beating the S&P 500

The fund in focus is iShares MSCI USA Quality Factor ETF (NYSEMKT: QUAL) This is an ETF that focuses on stocks in the US market that screen up as high quality.

What do I mean by high quality? Well, specifically, it focuses on companies that have:

• A high return on equity
• Stable year-on-year earnings growth
• Low financial leverage

The top five holdings at the end of July were Nvidia, Apple, Microsoft, Visa, and Mastercard.

In terms of performance, this ETF produced a return of 13.36% a year over the 10-year period to 31 July. That compares to a return of 13.11% a year for the iShares S&P 500 ETF (and 6.1% for the iShares Core FTSE 100 UCITS ETF).

So the focus on quality paid off. It’s worth noting here that quality’s one of the major factors that investors can focus on when investing in stocks. Some others are value, growth, size, and momentum.

How UK investors can gain exposure

Now the bad news. This exact ETF isn’t available to UK investors as it’s a US product. The good news however, is that there’s a UCITS version of the fund that is available. This is the iShares Edge MSCI USA Quality Factor UCITS ETF (LSE: IUQA).

In terms of portfolio construction and holdings, this ETF’s pretty much identical to the product I mentioned above (the top five holdings at the end of July were exactly the same).

It just doesn’t have a 10-year performance figure. That’s because it was only launched in 2016.

If the iShares MSCI USA Quality Factor ETF was to continue outperforming the S&P 500 though, I’d expect the iShares Edge MSCI USA Quality Factor UCITS ETF to do the same (in GBP terms).

Ultimately, it’s nearly identical to its big brother.

A good core holding?

I’ll point out that looking ahead, I’m not expecting this ETF to outperform the S&P 500 all the time.

While high-quality stocks tend to perform pretty well over the long term, there are going to be periods when they underperform.

For example, they sometimes lag the market when there’s a rush into lower-quality cyclical stocks.

One other thing to be aware of with this product is that its fees are slightly higher than those of the basic iShares S&P 500 tracker. The total expense ratio’s 0.2% versus 0.07% for the iShares Core S&P 500 UCITS ETF (it’s still very cheap).

Overall though, I think it’s a lot going for it. For those looking for a solid core portfolio holding, I think this ETF’s worth considering.

The post Over the last 10 years, this ETF’s beaten both the FTSE 100 and the S&P 500 appeared first on The Motley Fool UK.