From 24/7 Wall St. · Ryne Mauck · · 1m 50s
One momentum screen beat the S&P 500 by 67 points
A simple strategy that picks the 100 fastest-rising S&P 500 stocks has crushed the index over five years, turning $100,000 into $63,000 more.
In brief
A simple strategy that picks the 100 fastest-rising S&P 500 stocks has crushed the index over five years, turning $100,000 into $63,000 more. Momentum investing within the S&P 500 universe can significantly outperform the broad index, but comes with higher concentration risk and sector bets. Originally reported by…
One ETF beat the S&P 500 by 67 points
SPMO returned 137.81% over five years versus the S&P 500's 70.27%. A $100,000 investment grew to $246,000 with SPMO but only $183,000 with the index.
“A hypothetical $100,000 compounded at 19.7% annually for five years grows to roughly $246,000. At 12.8%, the same starting balance grows to about $183,000.”
It picks the 100 fastest-rising S&P 500 stocks
SPMO tracks the S&P 500 Momentum Index, which selects roughly 100 stocks with the strongest momentum scores. The index rebalances twice yearly in March and September.
“The idea behind the strategy is straightforward: stocks that have demonstrated stronger recent relative performance may continue outperforming.”
Tech stocks now dominate the portfolio
Technology represents roughly 54% of SPMO's holdings. Micron Technology alone accounts for more than 11% of assets, while Nvidia represents roughly 9% and Broadcom more than 6%.
The cost is almost nothing to implement
SPMO charges an expense ratio of just 0.13%, or roughly $13 annually for every $10,000 invested. This low fee makes the momentum strategy accessible to most investors.
“SPMO charges an expense ratio of just 0.13%, or roughly $13 annually for every $10,000 invested.”
But momentum strategies carry hidden risks
SPMO concentrates heavily in sectors that have already performed well. If market leadership shifts, the fund could hold yesterday's winners while missing tomorrow's leaders.
“If leadership changes quickly, SPMO can find itself holding yesterday's winners while the rest of the market rotates elsewhere.”
Portfolio turnover is 44% annually
SPMO turns over its holdings much faster than a standard S&P 500 fund because it must continually identify new momentum leaders. This higher turnover can create tax inefficiency.
“The fund has a recent portfolio turnover of 44%.”
It's not a simple S&P 500 replacement
SPMO is a concentrated bet on momentum, not a broad market fund. Investors should view it as a tactical strategy, not a core holding for everyone.
“Investors should therefore view SPMO as more than a slightly modified S&P 500 fund.”
At a glance
Momentum investing within the S&P 500 universe can significantly outperform the broad index, but comes with higher concentration risk and sector bets.
