Monika Dutt: Quality is a fuzzy factor. There is no one definition for quality, nor is there clear consensus that it is a true stand-alone factor. Typically, a quality company is more profitable, financially healthy and offers stable earnings over time relative to its average competitor. These tend to be mature businesses with sustainable competitive advantages like Microsoft, Unilever and AstraZeneca.
Research suggests that stocks with higher-quality characteristics have historically offered better risk-adjusted returns than lower-quality stocks.
Investors considering quality-focused funds are best advised to check valuations before making their portfolio selection decision. Quality stocks tend to come at a premium and they are not necessarily good investments at any price.
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