The ETF tracks a quality growth index that selects stocks from the U.S. large- and mid-cap universe using a composite score of revenue growth, profitability (return on equity) and valuation. Unlike a simple growth-factor ETF, it excludes stocks with weak financial quality or excessively high valuations.

It suits investors who want growth exposure while also considering financial soundness and a valuation margin of safety.

Launched by American Century in 2019, it is a passively managed (index-tracking) ETF.

The ETF tracks a quality growth index that selects the top 50 or so stocks from the U.S. large- and mid-cap universe, based on a composite score of revenue growth, return on equity, free cash flow stability and valuation. Individual stock weights are determined by free-float market capitalization weighting.

• A three-step filter that requires growth, quality and valuation at the same time
• A concentrated portfolio of about 50 stocks

Assets under management (AUM) stand at $1.9B, and the total expense ratio is 0.29% per year.

Compared with QUAL and SPHQ in the same category, QGRO has a higher growth-factor weighting and fewer holdings, which makes it more concentrated. Its fee level is low relative to the average for quality and growth factor ETFs.

It tends to move in line with U.S. large-cap growth stocks overall, and it reacts sensitively to Big Tech earnings seasons and the direction of interest rates. Because a quality filter is applied, extreme volatility is somewhat tempered compared with a pure growth index.

As interest grows in ETFs that combine the quality and growth factors, fund inflows have continued steadily. When economic uncertainty is high, preference tends to rise for portfolios with financial soundness criteria.

The composite growth, quality and valuation criteria set it apart, but investors should keep in mind that, as a concentrated portfolio, individual stocks have a large impact.

QUAL, shown in the table, is a quality factor ETF managed by iShares. It has more holdings than QGRO and a lower growth bias. SPHQ tracks the S&P 500 quality index and has a broader market-cap base, while DGRW takes a different approach by linking quality factors to dividend growth. JQUA is a quality growth ETF managed by J.P. Morgan with similar positioning. For investors who want to focus more on the growth factor, broad growth index ETFs such as Vanguard's VUG and Schwab's SCHG are also worth comparing. It is useful to compare U.S. large-cap growth stocks from multiple angles, without leverage, to set your selection criteria.

Because QGRO is a concentrated growth-stock portfolio, it is important to review its fee level, index inclusion criteria, top-holding concentration and currency exposure before investing. Investors should approach it with the understanding that it adds a financial soundness criterion to a growth factor ETF structure.

As growth stocks, holdings can come under valuation pressure when interest rates rise, and a concentrated portfolio of around 50 holdings is sensitive to issues at individual companies. Exchange rate fluctuations are an additional source of gains or losses for investors who hold won.

For investors seeking quality and growth at the same time, QGRO is a choice worth considering. Compared with pure growth index ETFs such as VUG and SCHG, it is distinguished by fewer holdings and an added financial soundness criterion, and for long-term holding, investors should weigh its fee level and concentration together.