Among the investment factors, quality is arguably the most popular because it offers exposure to companies with strong fundamentals, such as stable profits and cash flows, low leverage, or better credit ratings. Looking at year-to-date performance, the S&P/TSX Composite Quality Index has slightly outperformed its parent index, the S&P/TSX Composite Index, while the S&P 500 Quality Index has underperformed its parent index, the S&P 500 Index. Though both indices are ‘quality-focused,’ their performance throughout the year has been materially different, resulting in distinct investment experiences.  

Looking Below the Surface

The sector allocations of the S&P/TSX Composite Quality Index and the S&P 500 Quality Index explain the performance difference between the two indices. Looking at their recent compositions as of November 2025, about 50% (i.e., 48.1%) of the S&P/TSX Composite Quality Index is allocated to the Energy and Materials sectors, with the latter performing very well throughout the year, driven by gold equities.

Conversely, the S&P 500 Quality Index's most significant allocations are in the industrial and information technology sectors, both of which account for approximately 50%. When examining the year-to-date performance of U.S. equity sectors, the communications sector leads all, yet its allocation within the S&P 500 Quality Index is surprisingly the smallest, at just 0.5%.

Investing in Canadian Quality

While investment factor performance naturally varies across market cycles, Canadian quality investing has delivered meaningful gains for investors this year. For those seeking turnkey ETF solutions with exposure to Canadian equities backed by strong fundamentals, options such as the Fidelity Canadian High Quality Index ETF – CAD (Ticker: FCCQ), CI Canada Quality Dividend Growth Index ETF – CAD (Ticker: DGRC), and iShares Core MSCI Canadian Quality Dividend Index ETF – CAD (Ticker: XDIV) are worth considering.  

FCCQ seeks to replicate the performance of the Fidelity Canada Canadian High Quality Index, which invests primarily in equity securities of large- and mid-capitalization Canadian companies with a higher quality profile than the broader Canadian equity market.

DGRC seeks to track the price and yield performance of the WisdomTree Canada Quality Dividend Growth Index, a fundamentally weighted index designed to provide exposure to dividend-paying Canadian companies with growth characteristics. The Index is dividend weighted quarterly to reflect each component company's share of the total cash dividends paid over the previous year. 

XDIV seeks to provide long-term capital growth by replicating the performance of the MSCI Canada High Dividend Yield 10% Security Capped Index.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.