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Is Franklin LibertyQ U.S. Equity ETF (FLQL) a Strong ETF Right Now?

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·4 min read
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Launched on 04/26/2017, the Franklin LibertyQ U.S. Equity ETF (FLQL) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Blend category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is sponsored by Franklin Templeton Investments. It has amassed assets over $945.90 million, making it one of the larger ETFs in the Style Box - Large Cap Blend. FLQL seeks to match the performance of the LibertyQ US Large Cap Equity Index before fees and expenses.

The U.S. Large Cap Underlying Index seeks to achieve a lower level of risk and higher risk-adjusted performance than the Russell 1000 Index over the long term by applying a multi-factor selection process, which is designed to select equity securities from the Russell 1000 Index that have favorable exposure to four investment style factors quality, value, momentum and low volatility.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.15% for FLQL, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.77%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector - about 23.50% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 1.20% of total assets, followed by Adobe Inc (ADBE) and Eli Lilly + Co (LLY).

Its top 10 holdings account for approximately 10.92% of FLQL's total assets under management.

Performance and Risk

So far this year, FLQL has gained about 17.63%, and is up roughly 22.62% in the last one year (as of 10/15/2021). During this past 52-week period, the fund has traded between $33.72 and $45.19.

The ETF has a beta of 0.91 and standard deviation of 21.47% for the trailing three-year period. With about 258 holdings, it effectively diversifies company-specific risk.

Alternatives

Franklin LibertyQ U.S. Equity ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.

IShares Core S&P 500 ETF (IVV) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY) tracks S&P 500 Index. IShares Core S&P 500 ETF has $295.94 billion in assets, SPDR S&P 500 ETF has $394.33 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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Franklin LibertyQ U.S. Equity ETF (FLQL): ETF Research Reports
 
Eli Lilly and Company (LLY) : Free Stock Analysis Report
 
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
 
Adobe Inc. (ADBE) : Free Stock Analysis Report
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
iShares Core S&P 500 ETF (IVV): ETF Research Reports
 
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