The American Century U.S. Quality Value ETF (VALQ) seeks to track an index that measures U.S. stocks exhibiting both quality characteristics and value metrics. This equity ETF focuses on companies with strong fundamentals trading at attractive valuations relative to their intrinsic worth.
How It Works
VALQ employs a quantitative, rules-based approach that screens U.S. stocks using dual criteria: quality metrics like return on equity, earnings stability, and debt levels, combined with value indicators such as price-to-earnings and price-to-book ratios. The fund uses a modified market-cap weighting methodology that tilts toward stocks meeting both quality and value thresholds. Portfolio rebalancing occurs quarterly to maintain factor exposures and incorporate new qualifying securities.
Key Features
- Combines quality and value factors in single ETF, avoiding the typical trade-off between cheap stocks and high-quality companies
- Zero expense ratio makes it one of the most cost-effective factor-based ETFs available to retail investors
- Quantitative screening process removes emotional bias from stock selection while maintaining systematic factor exposure
Risks
- This ETF can lose value when growth stocks significantly outperform value stocks, as seen during 2017-2021 technology rallies
- Quality value stocks may underperform during momentum-driven markets when investors favor high-growth companies regardless of valuation
- Broad equity market declines could cause 25-35% losses during bear markets, though quality metrics may provide some downside protection
Who Should Own This
Best suited for long-term investors with 5+ year time horizons seeking factor-based equity exposure as a satellite holding (10-25% of equity allocation). Medium risk tolerance required due to value factor volatility. Ideal for investors believing in mean reversion and wanting systematic exposure to undervalued, high-quality U.S. companies.