Personal Finance & Money Asked by SimpleThings on March 26, 2021
I am trying to build a multi-factor portfolio which includes the Quality factor. However, I am having problem finding out which of the ETFs (that I am considering) has higher profitability / quality premium, and thus it contains more "quality" stocks as well.
I read the book "Your Complete Guide to Factor-Based Investing" by Andrew L Berkin, Larry E Swedroe where it was mentioned that:
So I was thinking how to use this information in order to recognize a quality company. So I digged out the following information for ETFs I am considering:
and stock style percentage:
Now I am trying to understand how to use this metrics to find out an ETF with the highest quality premium. From the upper most points 1) & 4) I guess I should consider ETF which has Price/Earning and Price/Book ratios?
From the point 3) I guess I have to aim for an ETF that has big allocation in "Large-Growth" stocks.
I also think that Price/Cashflow Ratio might play a role as well?
Basically my quesiton boils down to what correlation the above metrics (ratios) need to have in order to be classified as a high quality ETF?
Sorry if my questions seem to be confusing, but I have begun getting into finances only recently and have a totally different background.
Thank you in advance!
Index providers MSCI and S&P publish Quality factor indices and their methodologies.
Answered by Orange Coast- reinstate Monica on March 26, 2021
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