Financial Well-being

By analyzing overall characteristics of top performing *growth* style etf, such as iShares Russell Top 200 Growth ETF (IWY), with top performing *momentum* style etf, such as Invesco S&P 500 Momentum ETF (SPMO), I have learnt one thing for sure. Growth style seems to have produced similar return as momentum style for long term (5, 10 years) horizon with comparatively much *lower risk*.  Growth fund (such as IWY) has mostly beaten broad market index every year since it's inception in 2009. However, momentum one (such as SPMO) keeps disappointing every other year by underperforming broad market.  So, for more aggressive investing strategy (say 20% of your stock portfolio), when it comes to choosing between growth and momentum, growth seems to be better option.

Invesco S&P 500 *Momentum* ETF (SPMO) seems to have produced *fantastic* total return as compared to Total Stock index. It is an excellent momentum strategy based inexpensive *passive* index fund for *bravehearted*.  It selects top 20% (around 100) companies from S&P 500 market cap index, factoring their last 12 months total return *momentum*. It allocates money based on *market cap* weightage as well as last year's total return *momentum*.  However, as de-risking strategy, it limits any single holding to 9% of portfolio to avoid just single company dominating it. With NVDA driven 45% return in 2024, it has produced annualized 20.57%, 19.83% and 17.77% for 3, 5 and 10 years periods as compared to VTI's  11.65%, 13.83% and 12.88% for same period. If we take out 2024 outperformance from equation, it's returns are similar to growth based IWY. However, above return comes with some added risk. It seems that every year when it outperforms broad market index, it underpe...

I don't like this concept of exchange biased *NASDAQ 100* index which Invesco QQQ Trust ETF (QQQ) follows. It does not make any sense to just *favor* one exchange over other. There are better *large cap growth* options (such as IWY) which don't have such weird bias. QQQ has enjoyed great ride of technology sector revolution of last 15 years. However, technology sector *lagged* quite a bit during previous decade of dot com bust. Having better *diversified* (without any *exchange bias* ) large cap growth fund, such as IWY, is perhaps safer bet.

When it comes to *pure technology* sector based passive index fund, I believe Technology Select Sector SPDR Fund etf (XLK) is pretty solid long term choice. This inexpensive (expense ratio 0.09%) passive etf tracks all the technology sector companies within S&P 500.  It caps weightage of top mega caps to max 50% of it's portfolio to *avoid overconcentration* to just few momentum mega cap technology stocks. Also, no single stock can weigh more than 23%.  Above *checks and balances* in capping individual *high flying* stock weightage was one of the main reasons how this fund outperformed it's index during *2022 technology crash*. It's losses were 10-15% less than it's index that year. It faired way better than it's index in dot com bust years too.  As always, consider limiting your investment into aggressive asset classes, such as technology, to max 20% of your stock equity holdings.