Quick Read
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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.
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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.
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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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Owning the S&P 500 has proven to be one of the simplest ways to build wealth over the long-term. 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 Starts With the S&P 500
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.
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That process currently produces a portfolio that looks considerably different from a traditional S&P 500 fund. Based on current holdings, technology represents roughly 54% of the fund. Names like Micron Technology alone account for more than 11% of assets. Meanwhile, Nvidia represents roughly 9%, followed by Broadcom at more than 6%. Johnson & Johnson, Advanced Micro Devices, Alphabet, and Lam Research are also among its largest positions. Altogether, the top 10 stocks represented just more than half of the portfolio.
