The S&P 500 is up a solid 13% year-to-date, but this large-cap exchange-traded fund (ETF) blows it away with a 30% year-to-date total return. For the Invesco S&P 500 Momentum ETF (SPMO -0.11%), it is all about momentum.
The Invesco Momentum S&P 500 ETF has outperformed the S&P 500 and other S&P 500 ETFs in every period since it launched on Oct. 9, 2015. Yet it is not even among the top 125 ETFs by assets under management, with about $22 billion in AUM.
The SPMO ETF has flown under the radar among large-cap investors, but it deserves a prominent place in a long-term portfolio. It alone, with persistence and discipline, could account for a significant portion of retirement savings.
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The outperformance is striking
This is not your typical S&P 500 ETF. The Invesco S&P 500 Momentum ETF tracks the Invesco S&P 500 Momentum Index, which includes about 100 large-cap stocks with high momentum scores. The momentum score is based on recent upward price movements relative to other stocks in the index.
NYSEMKT: SPMO
Key Data Points
The score is calculated by looking at the percentage change in each stock's price over the past 12 months, excluding the most recent month. Then, that score is adjusted based on a stock's volatility, or up-and-down movement, over that period. Each stock is weighted by multiplying its market cap and momentum score. The fund is rebalanced twice a year, in March and September.
Currently, the top three holdings are Micron Technology, Nvidia, and Broadcom.
SPMO's performance relative to the Vanguard S&P 500 ETF (VOO -0.44%) is striking:
Data by YCharts.
SPMO is up 30% year-to-date, compared to 13% for Vanguard's ETF. It has a one-year return of 32% versus 20% for VOO, and a three-year annualized return of 39% compared to 21% for the Vanguard S&P 500 ETF.
Looking back five years, the Invesco S&P 500 Momentum ETF has had an annualized return of 20%, beating the VOO's 12% average annualized return. Further, the Invesco ETF has had a 10-year average annualized return of 19% compared with the Vanguard ETF's 13%.
A 20% average return over the past 10 years
Aside from the long-term outperformance, the Invesco S&P 500 Momentum ETF tends to do well in down markets, too. That's because it focuses on momentum stocks.
When the S&P 500 was down 19% in 2022, for example, this ETF was only down 12%. And when markets are strong, like 2024, when the S&P 500 was up 23%, SPMO jumped 45%.
SPMO does have a higher expense ratio of 0.13%, but it's not nearly high enough to offset its strong outperformance.
If you just go off its past 10 years, SPMO averaged a 19% annual return and a 20% annual return with dividends reinvested.
If you invested $10,000 in this ETF today and contributed $100 per month, with a 20% annual return over the next 20 years, your investment would grow to roughly $627,000. That could go a long way toward funding a large part of your retirement.
