SPMO's momentum screen delivered 20% annualized returns over five years, outpacing the S&P 500's 13% and widening the cumulative gap to 67 percentage points. A $100,000 investment in SPMO five years ago grew to roughly $246,000, compared to $183,000 in a standard S&P 500 fund. SPMO concentrates 54% of assets in technology and carries 44% annual portfolio turnover, making it far more volatile than a plain index fund.
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But one ETF has taken the same pool of large-cap stocks, applied a momentum screen, and produced substantially better results over the last five years. The Invesco S&P 500 Momentum ETF (NYSEARCA:SPMO) has returned 137.81% cumulatively over the last five years, working out to just shy of 20% annualized. By comparison, the S&P 500 has returned 70.27% over the same period, or approximately 13% annualized.
This momentum-driven performance advantage results in two portfolios with drastically different ending values. SPMO does one thing, and it does it very well – momentum. SPMO does not venture into small-cap stocks, obscure technology companies, or speculative names looking for the next market winner.
Rather, it starts with companies already included in the S&P 500 and tracks the S&P 500 Momentum Index. The index selects roughly 100 stocks with the strongest momentum scores and reconstitutes and rebalances twice per year, in March and September. The idea behind the strategy is straightforward: stocks that have demonstrated stronger recent relative performance may continue outperforming.
Constituents are then weighted using both market capitalization and their momentum scores. SPMO charges an expense ratio of just 0.13%, or roughly $13 annually for every $10,000 invested. 24/7 Wall St has helped investors make money for over two decades, and our top analysts just finished ranking the definitive Top 10 Stocks To Buy Now. Not the ten biggest companies.
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