Vanguard U.S. Quality Factor ETF

Vanguard U.S. Quality Factor ETF (VFQY) is an actively managed fund. It uses a computer model to pick U.S. stocks of all sizes with strong profitability, steady earnings and healthy balance sheets. As of May 31, 2026, it held 444 stocks, and none made up more than about 1.8% of the fund. Its 0.13% expense ratio is well below the 0.32% average for similar funds. However, its three-year return trailed all eight similar funds as of October 27, 2026.

• Over the year to Oct 27, 2026, VFQY returned +16.5%, 5th of 9 among similar funds.
• Its 5-year annualized return was +9.3%.
• Its worst full calendar year was 2022 (-15.7%); its best was 2021 (+27.9%).
• The deepest fall in its price history was 25.9% (Nov 16, 2021 to Jun 16, 2022), recovered by Dec 14, 2023.

As of May 31, 2026, the fund held 444 securities; the ten largest made up 14.96% of assets.

By sector

• Over the three months to May 31, 2026, investors withdrew a net $2.3M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: -5.10%, +6.87%, +3.08%.

VFQY does not track an index. Vanguard's advisor runs it actively, using a quantitative model to score every stock in a pool of U.S. large-, mid- and small-company shares. A quantitative model is a set of computer-driven rules. The model looks for what the prospectus calls strong fundamentals, such as strong profitability, sustainable earnings and healthy balance sheets. Under normal conditions, at least 80% of net assets go into U.S. companies.

The model's picks then pass through a rules-based screen. The screen aims to keep the portfolio spread across many sectors and to limit exposure to thinly traded stocks. The result is a broad, fairly even portfolio. As of May 31, 2026, the fund held 444 stocks, and the 10 largest made up about 15% of assets. Fortinet, Apple, Lam Research, Adobe and KLA led the list, each at between 1.5% and 1.8%.

The prospectus does not set a fixed rebalancing schedule, but holdings change steadily. Portfolio turnover was 41%, which means trading equal to about that share of the portfolio's value over the year. Trading costs are not included in the expense ratio. The fund also held a tiny position in S&P 500 futures (about 0.02% of assets) and about 0.23% in cash. It does not use leverage or options.

• VFQY charges 0.13% a year, versus an average of 0.32% for the similar funds below (2nd of 9, cheapest first).
• Of that, 0.1% is the management fee; the rest covers other fund expenses.
• Using the prospectus's standard example, $10,000 invested would cost about $13 in the first year and $166 over 10 years (assuming a 5% annual return).

It could add a tilt toward profitable, financially sturdy U.S. companies alongside a broad stock fund, spread across 444 stocks with no large single bets.

VFQY's track record in downturns is short. It launched in 2018, so it missed 2008. The price history starts after the 2020 crash, but the prospectus shows a 26.18% loss in the first quarter of 2020. Its deepest drop in the available history was 25.9%, from November 2021 to June 2022. It took about 18 months to recover, until December 2023. Its worst calendar year was 2022, at -15.7%. A retiree who had to sell during a stretch like that would lock in losses. That is why some keep spending money outside stocks.

Income is modest: the trailing yield was 1.0% as of October 27, 2026, paid quarterly. Costs are low at 0.13% a year. In the SEC's standard example, that comes to $166 over 10 years on $10,000. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.

Matched by holdings overlap from the latest N-PORT reports.