FQAL vs XSHQ

FQALAFidelity Quality Factor ETF

XSHQBInvesco S&P SmallCap Quality ETF

In short

FQAL Fidelity's own quality screen, boxed into an ETF: roughly 130 U.S. companies picked for profitability, steady cash flow and clean balance sheets, at 0.15% a year, well under the typical fee in the quality-factor group.

XSHQ Most quality ETFs shop the S&P 500. XSHQ works the small-cap aisle: start with an index that already requires positive earnings, then keep the roughly 120 names scoring best on profits, accruals and leverage.

Stated mandate

FQAL The fund prioritizes U.S. companies exhibiting higher profitability, stable cash flows, and strong balance sheets.

XSHQ The Fund seeks to track, before fees and expenses, the price and yield performance of the S&P SmallCap 600 Quality Index.

Why people hold it

• FQAL Costs 0.15% a year, roughly half the typical fee among quality-factor ETFs. That puts it in the cheapest tier of the group, alongside JQUA, VFQY and QUAL.
• The rulebook is Fidelity's own: the Fidelity U.S. Quality Factor Index, tracked tightly. One of the closer index implementations in its peer group.
• Live since 2016 and now a multi-billion-dollar fund, so this is a settled product rather than a launch still finding its footing.
• The screen is explicit about what it wants: higher profitability, stable cash flows, strong balance sheets. No vague 'quality' hand-waving.

• XSHQ Quality is a formula, not a vibe: names ranked on return on equity, accruals ratio and financial leverage, weighted by score times market cap, reset each June and December.invesco.comspglobal.com
• The starting pool is already picky: S&P 600 membership requires positive earnings in the latest quarter and across the trailing four, so chronic money-losers never reach the screen.sec.gov
• Live since 2017, and no other fund in its quality-factor peer group tracks this index. It is the small-cap specialist in a lineup built around blue chips.
• Holdings line up closely with what the label promises, and the fund sits in the upper half of its quality-factor peer group. It pays quarterly.

Worth knowing

• FQAL Roughly 130 stocks, not the whole market. A narrower bench means individual names and sector tilts carry more weight than in a total-market fund.
• Trading volume is light next to the category's biggest quality funds, which can show up as wider bid-ask spreads.
• Distributions come quarterly, but the screen hunts profitability and balance-sheet strength, not yield.

• XSHQ At 0.29% it runs about double the big large-cap quality funds (JQUA 0.12%, QUAL 0.15%), though that is right at the median for the wider quality group.
• Trades thinly next to the large-cap quality names, so spreads can widen at the open and close.
• Small caps swing harder than blue chips, and the screen narrows to about 120 names, so one company's stumble carries more weight.

Full FQAL profile⁠

Full XSHQ profile⁠