Title: ETF Portfolio Update July 2026 Show: Compounding Quality (Substack, paid post — compoundingquality.net) Guest: TJ Terwilliger (guest author; byline "TJ TERWILLIGER", signed off "Team Compounding Quality") Date: 2026-07-30 URL: https://www.compoundingquality.net/p/etf-portfolio-update-july-2026 Length: written post — no timestamps Note: Paid-subscriber post captured via Stephen's logged-in session. Body text verbatim; UI chrome removed. Charts noted inline as [Image — …]. The VFLO top-10 holdings table and the two ETF-portfolio weight/performance charts are published as images and are transcribed below as [Table image — …] blocks. The portfolio ETFs are named in the charts but their tickers are NOT given in the post — only VFLO, USMV and MVOL.L are stated as tickers, so no others are inferred here.
You want to invest in companies that generate a lot of cash.
But you know what's even better?
Companies that:
Generate a lot of cash
Are growing attractively
Trade at cheap valuation levels
The good news is you can easily achieve this via some well-chosen ETFs.
The Buffett Mindset
When you look at a ticker on a screen, it's easy to forget what you're actually buying.
Warren Buffett has called The Intelligent Investor by Ben Graham the best investing book ever written.
Here are the three most important takeaways:
[Image — three takeaways from The Intelligent Investor]
The most important thing?
When you buy a stock, you become the owner of that company.
It's like buying a part of your local butcher across the street.
And it also means: if you buy 1 share of a company, you should be willing to buy the entire business if you had the money.
So just imagine you buy 1 share of Apple today.
In that case, you would be willing to buy the entire company for $4.6 trillion and you think it's worth more than that.
PS If you have $4.6 trillion available, please send me a DM.
I'm just kidding of course… Or not?
What's the Purpose of a Business?
If owning a stock makes you a business owner, it's worth asking what the purpose of a business is.
I think the easiest way to answer this is to think about a small, local business.
You probably have a gas station or convenience store in your town.
Let's use this as an example.
The owner runs the business to make sure your car is fueled with gas, and that you're fueled with coffee or snacks.
But the real purpose?
To sell you those things so that the owner earns an income.
Which, of course, means cash.
A business can look profitable on paper…
But if it has to reinvest every dollar into inventory or repairing gas pumps, it's not a great business.
Why would you want to own it?
As an investor, you want businesses that produce a lot of Free Cash Flow (FCF).
Free Cash Flow is the real cash a company generates after deducting all expenses.
It's basically all cash that comes in minus all cash that goes out.
[Image — free cash flow explainer]
Two ways to win
The beauty of being an investor?
You have more than one way to win.
A business owner makes more money when the business becomes more profitable.
But as an investor, you can win in two ways:
More profit: The business grows its earnings.
Higher valuation: The market decides to pay more for those earnings (e.g., the P/E ratio goes up).
More profit
Nvidia's stock surged nearly 900% between 2023 and 2025.
That's despite its P/FCF multiple falling from over 100x to 58x.
The reason? Free cash flow grew by almost 25x (+2,500%).
[Image — Nvidia FCF and multiple. Source: Fiscal.ai]
Multiple Expansion
But a stock can also go up without profits growing.
Just take Apple from 2022 to 2025.
The stock went up more than 60% during that period:
[Image — Apple share price. Source: Fiscal.ai]
But Free Cash Flow went down during the same period.
What happened?
The answer is multiple expansion.
The market decided that instead of being worth 20x cash flow, Apple was worth 40x.
In other words: the valuation of Apple doubled.
[Image — Apple P/FCF multiple. Source: Fiscal.ai]
The Twin-Engines of Returns
But what if both engines fire together? That's where magic happens.
In his book 100 Baggers, Chris Mayer calls this the 'twin-engines' of wealth creation.
Engine 1: High earnings growth (like Nvidia).
Engine 2: Multiple expansion (like Apple).
When you buy a cheap, growing company, you benefit from both rising cash flows and an expanding valuation multiple.
That's what happened to Caterpillar ($CAT) from 2019 to today.
Free Cash Flow: +86%
Multiple: +186%
Stock Price: +536%
High earnings growth + multiple expansion is the golden goose for you as an investor.
[Image — Caterpillar. Source: Fiscal.ai]
To summarize
Stocks are pieces of businesses.
Businesses exist to generate cash.
Investors make money in two ways:
When the business generates more cash
When the market is willing to pay a higher multiple for that cash.
Combining growth with an attractive valuation gives you two powerful engines for compounding.
Wouldn't it be interesting to buy an ETF that captures exactly these characteristics?
The good news is that you can.
ETF of the Month: VictoryShares Free Cash Flow ETF (VFLO)
Key Information
Name: VictoryShares Free Cash Flow ETF
Ticker: VFLO
Total Expense Ratio: 0.39%
Physical/Synthetic ETF: Physical
What?
The ETF invests in large companies in the United States with a specific set of characteristics:
High Free Cash Flow Yield
Strong forward growth
You might be wondering how this works in practice.
The ETF starts with the VettaFi US Large Cap Free Cash Flow Index.
Afterwards, it applies a two-step filter:
Value: It finds companies generating the most free cash flow relative to their enterprise value
Growth: It screens out companies with the lowest expected growth
[Image — index methodology. Source: Victory Capital]
Why?
Buying the cheapest companies with the highest expected growth gives us the best chance to let our two favorite return engines work together:
Attractive growth
Room for multiple expansion
Historically, this strategy has worked very well.
Companies with the highest expected FCF/EV had a return of 17.3% (!) per year:
[Image — backtest by FCF/EV quintile. Source: Victory Capital]
Sector Split
Here's the sector breakdown of the ETF.
The three largest sectors are Information Technology (38.6%), Health Care (17.9%) and Consumer Discretionary (15.9%).
[Image — sector breakdown. Source: Victory Capital]
Top Holdings
Here are the top 10 holdings of VFLO:
[Table image — "Top 10 Holdings (As of 07/08/2026)", Holding Name / Portfolio (%): Adobe Inc 3.51; Expedia Group Inc. 3.46; Devon Energy Corp. 3.45; Salesforce Inc 3.02; Accenture plc 3.00; Intuit Inc 2.98; Newmont Corp 2.95; Merck & Co Inc. 2.88; Coeur Mining Inc 2.87; ExxonMobil Holdings Corp 2.76. Total % of Portfolio: 30.89. Source: Victory Capital]
ETF Portfolio Update: July 2026
Now let's dive in Our ETF Portfolio Update.
Our Portfolio is a great mix of ETFs that should be able to outperform in the long term.
We use multiple factors that tend to do well:
Quality: Only invest in companies that have already won Size: The smaller the better Multifactor: Quality, size, value & momentum Emerging Markets: Small exposure to Emerging Markets
Let's now dive into the ETF Portfolio itself.
You have 24/7 access to the ETF Portfolio here: ETF Portfolio
Please note there's a portfolio for Americans.
And another one for non-Americans.
Why?
If you live in the US, you can't buy non-US ETFs.
And if you live outside the US, you can't buy US ETFs.
American ETF Portfolio
The American ETF Portfolio is invested in these ETFs:
[Table image — "Weight" pie chart, American ETF Portfolio: Vanguard Small-Cap ETF 21.9%; WisdomTree Emerging… 18.4%; Invesco S&P 500 Equal… 17.4%; VanEck Morningstar Wid… 11.6%; Tema Durable Quality ETF 10.6%; Invesco S&P MidCap Qu… 10.6%; iShares MSCI USA Min V… 9.5%. (Some labels truncated in the source image; no tickers given in the post.)]
The performance per position looks as follows:
[Table image — "Performance Portfolio" bar chart, American ETF Portfolio (approximate values read from the chart): Vanguard Small-Cap ETF ~+65%; WisdomTree Emerging Markets Multifactor Fund ~+39%; VanEck Morningstar Wide Moat ETF ~+31%; Invesco S&P 500 Equal Weight ETF ~+30%; Invesco S&P MidCap Quality ETF ~+20%; Tema Durable Quality ETF ~+20%; iShares MSCI USA Min Vol Factor ETF ~+7%]
The return per transaction:
[Image — return per transaction, American ETF Portfolio]
Non-American ETF Portfolio
The Non-American ETF Portfolio is currently invested in these ETFs:
[Table image — "Weight (%) per ETF" pie chart, Non-American ETF Portfolio: 21.0% (label truncated in source image); iShares MSCI World Small… 18.3%; iShares Edge MSCI World… 17.0%; iShares Core MSCI Emergi… 16.2%; iShares S&P 500 Equal We… 14.1%; VanEck Morningstar Glob… 13.5%. (Two labels begin "iShares Edge MSCI World" — the Multifactor and the Minimum Volatility UCITS ETFs — and cannot be told apart from the image; no tickers are given in the post.)]
The performance per position looks like this:
[Table image — "Performance Portfolio" bar chart, Non-American ETF Portfolio (approximate values read from the chart): iShares Edge MSCI World Multifactor ~+51%; iShares Core MSCI Emerging Markets ~+40%; iShares S&P 500 Equal Weight ~+34%; iShares MSCI World Small Cap ~+29%; VanEck Morningstar Global Wide Moat ~+17%; iShares Edge MSCI World Minimum Volatility UCITS ETF ~+12%]
Here's the return per transaction:
[Image — return per transaction, Non-American ETF Portfolio]
Overall, our Non-American ETF Portfolio is currently slightly outperforming the American one:
[Image — portfolio comparison]
Over time, I expect both portfolios to generate similar returns.
New transaction
Tomorrow at the market opening, we will add to our ETF Portfolio.
Which ETF we're buying?
The image below compares the performance of high-volatility stocks versus low-volatility stocks.
The more the line goes up, the more high-volatility stocks are outperforming low-volatility stocks.
[Image — high-vol vs low-vol relative performance. Source: Tobias Carlisle on X]
High-Volatility stocks are now outperforming low-volatility stocks by a wide margin.
We need to go back to 2006 to see this level of discrepancy.
This shows that low volatility stocks are cheap, and probably have room for their multiples to expand.
That's why we'll add some to our low volatility stocks this month.
For Americans:
iShares MSCI USA Min Vol Factor ETF ($USMV) for $500
Current stock price: $98.35
For Non-Americans:
iShares Edge MSCI World Minimum Volatility UCITS ETF ($MVOL.L) for €500
Current stock price: €76.91
Everything In Life Compounds Team Compounding Quality
Book: Order your copy of The Art of Quality Investing here
Used sources: Interactive Brokers (portfolio data and executing all transactions); Fiscal.ai (financial data)