The VanEck MSCI International Quality ETF (ASX: QUAL) is trading at $57.85 on Tuesday, up 0.33%.
This ASX exchange-traded fund (ETF) is different to those that track market-cap-weighted indexes like the S&P/ASX 200 Index (ASX: XJO) or the S&P 500 Index (SP: .INX) in the United States.
Let's look at how.
A market-cap-weighted index is a list of companies ranked and weighted according to the size of their market capitalisation.
Market capitalisation is a company's share price multiplied by the number of shares issued.
The QUAL ETF is also an index-tracking ETF, but its index only includes stocks that meet certain financial metrics, or 'quality' criteria.
The QUAL ETF seeks to track the MSCI World ex Australia Quality Index before fees.
The stocks in this index all meet three quality metrics: a high return on equity (ROE), earnings stability, and low financial leverage.
There are approximately 300 stocks in this ASX ETF.
About 76% are US shares, 5.3% are Swiss stocks, 4.9% are UK stocks, and 3.2% are Japanese stocks.
In terms of industry sectors, almost 30% of this ETF is in tech stocks, 16% is in healthcare, and 14% is in communications.
The ETF's top seven stock holdings are Meta Platforms Inc (NASDAQ: META) 5.39%, NVIDIA Corp (NASDAQ: NVDA) 5.19%, Microsoft Corp (NASDAQ: MSFT) 5.06%, Apple Inc (NASDAQ: AAPL) 4.86%, Visa Inc (NYSE: V) 3.49%, Alphabet Inc (NASDAQ: GOOG) 2.81%, and Eli Lilly And Co (NYSE: LLY) 2.54%.
VanEck created the QUAL ETF in October 2014. Since its inception, the ASX ETF has delivered an average annual total return of 15.72%.
The ASX ETF pays distributions, or dividends, once per annum.
The management fee is 0.4% per annum.
On 7 June last year, the QUAL ETF closed at $56.08 apiece.
If you had put $10,000 into QUAL then, it would have bought you 178 units (for $9,982.24).
There's been a capital gain of $1.77 per unit since then.
This means you've received a small amount of capital growth, worth $315.06, over the past year.
Therefore, your portfolio is now worth $10,297.30.
In terms of dividends (called 'distributions' with ETFs), QUAL paid 264 cents per unit on 23 July last year.
That gave you $469.92 in annual income.
Your capital gain of $315.06 plus $469.92 in dividends gives you a total dollar return of $784.98 over the past 12 months.
Now remember, you invested $9,982.24 buying your 178 units on 7 June last year.
This means you have received a total return, in percentage terms, of 7.86%.
That's a respectable annual return, but it's well below the QUAL ETF's average annual return of 15.72%.
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