Overcoming this obstacle hasn’t been particularly arduous over the past decade. FTSE100 index. But it was demanding to outperform the S&P 500 as it rose on sturdy gains from large-cap technology stocks.

There are, however, products that have managed to beat the S&P during this period. Here is one ETF that has generated higher returns than the US index.

Beating the S&P 500

The fund we are focusing on is iShares MSCI USA Quality Factor ETF (NYSEMKT: QUAL) This is an ETF that focuses on stocks in the US market that are considered to be of high quality.

What do I mean by high quality? Well, specifically, I focus on companies that have:

• High return on equity
• Stable profit growth year over year
• Low financial leverage

The five largest items at the end of July were: Nvidia, Apple, Microsoft, VisaAND MasterCard.

In terms of performance, this ETF returned 13.36% per annum over the 10-year period ending July 31. This compares to a return of 13.11% per annum for iShares S&P 500 ETF (and 6.1% for iShares Core FTSE 100 UCITS ETF).

So the focus on quality paid off. It’s worth noting that quality is one of the main factors investors can focus on when investing in stocks. Others include value, growth, size, and momentum.

How UK investors can gain exposure

Now for the bad news. This particular ETF is not available to UK investors as it is a US product. The good news is that a UCITS version of the fund is available. This is iShares Edge MSCI USA Quality Factor UCITS ETF (LSE:IUQA).

In terms of portfolio construction and assets held, this ETF is virtually identical to the product I mentioned above (the five largest assets at the end of July were exactly the same).

It simply doesn’t have a 10-year performance indicator. That’s because it was only launched in 2016.

However, if the iShares MSCI USA Quality Factor ETF continues to outperform the S&P 500, I would expect the iShares Edge MSCI USA Quality Factor UCITS ETF to do the same (in British pound terms).

After all, he is almost identical to his older brother.

Good core?

I want to emphasize that, looking forward, I do not expect this ETF to consistently outperform the S&P 500.

While high-quality stocks tend to do quite well over the long term, there are times when they underperform.

For example, they sometimes lag the market when there is a wave of investing in lower quality cyclical stocks.

Another thing to keep in mind with this product is that its fees are slightly higher than those of the iShares S&P 500 core tracker. The total expense ratio is 0.2% compared to 0.07% for the iShares Core S&P 500 UCITS ETF (still very inexpensive).

Overall, I think there are a lot of positives. For those looking for a solid core portfolio, I think this ETF is worth considering.