Vanguard popularized the concept of indexing back in the 1970s, and the asset manager has been the passive management leader ever since.
In recent years, Vanguard has been one of the fastest-growing asset managers, thanks to its exchange-traded funds (ETFs). According to Motley Fool Research, it had the most three-month ETF inflows over the last three months of 2025.
Vanguard has long been in demand for its low-fee, index-based exchange-traded funds (ETFs). But over the past several years, it has been rolling out more actively managed funds, broadening its offerings to perhaps prepare for markets where the indexes aren't churning out double-digit returns, and the bulls aren't running. It's in those markets where actively managed ETFs become more necessary, as managers can tweak the portfolio in response to market conditions.
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One of its fairly new actively managed Vanguard ETFs has been shining in this market. While the major indexes are all in negative territory, the Vanguard U.S. Momentum Factor ETF (VFMO +2.19%) has done the opposite, churning out positive returns.
Here's why the Vanguard U.S. Momentum Factor ETF might be a smart choice for investors right now.
The Vanguard U.S. Momentum Factor ETF beats the benchmarks
The Vanguard U.S. Momentum Factor ETF is managed by Vanguard's Quantitative Equity Group and managed by Scott Rodemer.
The stocks in the portfolio are selected by a rules-based quantitative model that looks for stocks of all market caps that have outperformed their benchmarks both 12 and six months out, and blends the portfolio between the two. The time frames do not include the most recent month to filter out short-term noise. There are other screens as well, but the idea is to find the stocks that have performed the best over the past year, anticipating that the momentum will continue.
NYSEMKT: VFMO
Key Data Points
The ETF currently holds 693 stocks, with Lam Research, GE Vernova, and Micron Technology the top three holdings.
The model has been effective as the ETF is up 3.4% year to date and 27% over the past 12 months. Meanwhile, the S&P 500 is down 3.9% year to date and up 16% over the past year. Its benchmark, the Russell 3000, is down 3.3% year to date and up 16.2% over the past 12 months.
It has also beaten both indexes over the past three years with an average annualized return of 22.6%. Its 9.4% annualized five-year return, however, falls a bit short of both.
But this is a great Vanguard ETF for volatile and difficult markets because it seeks out the top performers across all market caps. When the bulls are running, it probably won't have the same type of outperformance, if any. But right now, if you are looking for some positive returns to balance out the negative returns, this ETF is an excellent choice.
