A JPMorgan Fund Holds Its Own Thanks to a Focus on Quality
Despite its defensive characteristics, the JPMorgan U.S. Quality Factor holds up in good times and in bad.
The U.S. stock market has been notching new highs, which tends to kick up the likelihood of a market pullback (defined as a drop of 5% to 10%) or even a correction (a 10% to 20% sell-off). That's where the JPMorgan U.S. Quality Factor ETF (JQUA) comes in.
The fund – a member of the Kiplinger ETF 20, our favorite exchange-traded funds, invests in high-quality U.S. companies with robust profit margins and little debt. Over the past five years, the portfolio of 200-odd stocks has consistently held up better than the S&P 500 Index in down markets.
In the tariff swoon of early 2025, for instance, JPMorgan U.S. Quality Factor lost 16.7%; the S&P 500, 18.8%. The fund weathered 2022, a tough year, better than the broad-market benchmark, too. And yet, despite the fund's defensive characteristics, its five-year annualized return, 15.8%, has, for the most part, kept pace with the 16.5% climb in the S&P 500.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Quality hallmarks of this JPMorgan fund
But minimizing losses is just a fringe benefit of this index fund's quality focus. The fund's underlying benchmark starts with the 1,000 largest U.S. stocks and ranks them on 10 quality measures that touch on profitability, financial strength and earnings quality.
Companies with good return on equity (a profitability measure), free cash flow (money left over after operating expenses and spending to maintain or upgrade long-term assets) to sales, and cash flow interest cover (a gauge of a company's ability to pay its interest obligations using its operating cash flow), for example, will rank well. Low volatility and stable earnings, among other measures, also matter.
The firms that rank best in each quality measure, on average, make it into the fund, and stocks are weighted by average quality scores.
At last report, Nvidia (NVDA), Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT) and Broadcom (AVGO) made up the fund's top five holdings. But concentration at the top isn't a concern here: The five stocks account for just 11% of assets.
By contrast, the five biggest stocks in the S&P 500 — Nvidia, Microsoft, Apple, Amazon.com (AMZN) and Meta Platforms (META) —make up 28% of the index.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related Content
-
Is Mechanical Breakdown Insurance Better Than an Extended Car Warranty?More insurers are starting to offer mechanical breakdown insurance to new car owners. What is it and should you buy it?
-
What to Do When You Bank Lowers Your APYWhy banks lower APYs, options you can explore when it happens and whether more rate cuts are on the horizon.
-
Forget Financial Forecasts: Focus on These 3 Goals for SuccessWe know the economy is unpredictable and markets will do what they do, no matter who predicts what. Here's how to focus on what you can control.
-
I'm a Wealth Planner: Forget 2026 Market Forecasts and Focus on These 3 Goals for Financial Success
We know the economy is unpredictable and markets will do what they do, no matter who predicts what. Here's how to focus on what you can control.
-
I'm a Financial Adviser: Why In-Person Financial Guidance Remains the Gold StandardFace-to-face conversations between advisers and clients provide the human touch that encourages accountability and a real connection.
-
This Is How You Can Turn Your Home Equity Into a Retirement BufferIf you're one of the many homeowners who has the bulk of your net worth tied up in your home equity, you might consider using that equity as a planning tool.
-
Dow Hits New High Then Falls 466 Points: Stock Market TodayThe Nasdaq Composite, with a little help from tech's friends, rises to within 300 points of its own new all-time high.
-
The Best Vanguard Bond Funds to BuyInvestors seeking the best Vanguard bond funds can pick between mutual funds and ETFs spanning maturities, credit qualities, tax treatment and geographies.
-
Feeling Too Guilty to Spend in Retirement? You Really Need to Get Over ThatAre you living below your means in retirement because you fear not having enough to leave to your kids? Here's how to get over that.
-
Strategies for Women to Maximize Social Security BenefitsWomen often are paid less than men and live longer, so it's critical that they know their Social Security options to ensure they claim what they're entitled to.
-
Dow, S&P 500 Rise to New Closing Highs: Stock Market TodayWill President Donald Trump match his Monroe Doctrine gambit with a new Marshall Plan for Venezuela?
