iShares Edge MSCI World Quality Factor ETF (IWFQ) £42.80

Gain to date: 6.2%

When flagging the iShares Edge MSCI World Quality Factor ETF (IWFQ) back in March we were working to a simple hypothesis. Rather than deciding the stocks you want to own as the basis for a diversified investment portfolio, why not decide what you don’t want to own and thereby avoid the weakest companies which could help drag down your performance.

This exchange-traded fund seemed a good way of achieving this aim as it applied a series of criteria to separate real quality businesses from the dross.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

Largely it has performed as we’d hoped. The ETF has achieved a gain of more than 6%, more than two-and-half times the 2.3% posted by the MSCI World in sterling terms. Annualise that rough six-month return and you get 12% which, if achieved, would be better than one might expect from equities over the long-term.

While the US market has made progress since we said to buy the iShares ETF it has been uneven and largely centred on stocks like Nvidia (NVDA:NASDAQ) with links to the hot AI (artificial intelligence) theme.

Nvidia is one of the top holdings in the 300-strong ETF portfolio along with Danish pharmaceutical firm Novo Nordisk (NOVO-B:CPH). The latter recently achieved a striking breakthrough with its Wegovy weight loss drug – with a key trial suggesting it cuts the risk of heart attack and stroke by 20%.

Its US counterpart Eli Lilly (LLY:NYSE) has also enjoyed a strong run of late thanks to positive news flow on its own obesity and Alzheimer treatments and is another big holding in the ETF portfolio.

WHAT SHOULD INVESTORS DO NOW?

The ETF remains an excellent option for investors. The ongoing charge of 0.3%, while more expensive than the vanilla ETFs which track the mainstream indices, compares favourably with actively managed funds. This is a great investment to make in an ISA or SIPP via monthly contributions.

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