About this video

• Video Title: This ETF just broke the stock market (Better than VOO!)
• Channel: Investing Simplified - Professor G
• Speakers: Professor G (Nolan Goa)
• Duration: 00:13:26

Overview

This video introduces and analyzes the Invesco S&P 500 Momentum ETF (SPMO), presenting it as a potentially superior alternative to the S&P 500 ETF (VOO). Professor G explains how SPMO identifies and invests in the top 100 momentum-driven stocks within the S&P 500, highlighting its historical outperformance, lower drawdowns during market downturns, and its potential fit within a diversified investment portfolio.

Key takeaways

• SPMO's Outperformance: The Invesco S&P 500 Momentum ETF (SPMO) has historically outperformed the S&P 500 ETF (VOO), with higher average yearly returns and significantly better performance over 3 and 5-year periods.
• Momentum Strategy: SPMO invests in the top 100 S&P 500 stocks with the highest momentum scores, calculated based on 12-month price performance adjusted for volatility, excluding the most recent month.
• Lower Risk in Downturns: Despite strong growth, SPMO has demonstrated more resilience during market downturns (e.g., 2018 and 2022) compared to VOO and even growth-focused ETFs like QQQM, exhibiting smaller percentage losses.
• Diversification and Holdings: The ETF is diversified across sectors like information technology, financials, consumer discretionary, and communication services, with top holdings including Nvidia, Meta, Amazon, and Broadcom, offering diversification beyond typical market-cap weighted ETFs.
• Fee and Portfolio Integration: SPMO has a low expense ratio of 0.13% and can be integrated into a three-fund portfolio, either as a standalone growth component or by creating a four-fund portfolio, offering flexibility for different investment strategies.
• Tax Efficiency: The ETF's low dividend yield makes it tax-efficient for taxable accounts, and its growth potential is also beneficial in tax-advantaged accounts like a Roth IRA.

The Invesco S&P 500 Momentum ETF (SPMO) selects approximately 100 stocks from the S&P 500 that have the highest momentum scores. This score is calculated by evaluating the percentage change in a stock's price over the last 12 months, excluding the most recent month. An adjustment is then applied based on the security's volatility over that same period. Volatility is defined as a statistical measurement of the magnitude of up and down asset price fluctuations.

Professor G suggests integrating SPMO into a personal investment portfolio for 2025 in a couple of ways:

1. As a Fourth Fund: He is comfortable converting a traditional three-fund portfolio into a four-fund portfolio, allocating 25% equally to value, foundational, SPMO, and growth ETFs.
2. As a Hybrid: He views SPMO as a hybrid between foundational and growth. Based on his previous portfolio allocation (40% value, 30% foundational, 30% growth), he would adjust it to 40% value, 20% foundational, 20% SPMO, and 20% growth by taking equally from the foundational and growth allocations.

He also notes that he personally prefers to invest in SPMO within a taxable account due to its low dividend yield (0.5%), which allows for tax-efficient growth. However, he also acknowledges its benefit in a Roth IRA for tax-free growth. For his own portfolio in 2025, he's incorporating SPMO into the growth portion of his three-fund portfolio, alongside SCHG and QQQM.

According to the prospectus mentioned in the video, the stated risks associated with a momentum-style ETF like SPMO include:

• Increased Volatility: Securities in a momentum strategy may be more volatile than the market as a whole.
• Underperformance: Returns on securities that have previously shown price momentum may be less than returns on other investment styles.
• Sudden Reversals: Momentum can turn quickly, and stocks that previously had high momentum may not continue to experience positive momentum.
• Periods of Unfavorability: There can be periods when the momentum style of investing is out of favor, potentially causing the fund's performance to suffer.
• Concentration Risk: The fund can be subject to significant losses if its concentrated top holdings, such as Nvidia and Meta, experience substantial declines.