A smart beta exchange traded fund, the iShares MSCI USA Quality GARP ETF (GARP) debuted on 01/14/2020, and offers broad exposure to the Style Box - All Cap Growth category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

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

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.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is managed by Blackrock. GARP has been able to amass assets over $201.53 million, making it one of the average sized ETFs in the Style Box - All Cap Growth. GARP seeks to match the performance of the MSCI USA QUALITY GARP SELECT INDEX before fees and expenses.

The MSCI USA Quality GARP Select Index composes of U.S. large and mid-capitalization growth stocks exhibiting favourable value and quality characteristics.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.47%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 48.10% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Consumer Discretionary and Financials round out the top three.

Taking into account individual holdings, Apple Inc (AAPL) accounts for about 5.27% of the fund's total assets, followed by Microsoft Corp (MSFT) and Nvidia Corp (NVDA).

GARP's top 10 holdings account for about 44.56% of its total assets under management.

Performance and Risk

The ETF has added roughly 20.51% so far this year and is up about 0% in the last one year (as of 12/18/2024). In the past 52-week period, it has traded between $47.04 and $58.87.

The fund has a beta of 1.08. With about 146 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI USA Quality GARP ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.

Fidelity Blue Chip Growth ETF (FBCG) tracks ---------------------------------------- and the iShares Core S&P U.S. Growth ETF (IUSG) tracks S&P 900 Growth Index. Fidelity Blue Chip Growth ETF has $2.95 billion in assets, iShares Core S&P U.S. Growth ETF has $21.78 billion. FBCG has an expense ratio of 0.59% and IUSG charges 0.04%.

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 - All Cap Growth.

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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iShares MSCI USA Quality GARP ETF (GARP): ETF Research Reports

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

iShares Core S&P U.S. Growth ETF (IUSG): ETF Research Reports

Fidelity Blue Chip Growth ETF (FBCG): ETF Research Reports

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