Invesco S&P 500 Momentum ETF (SPMO) - Excellent momentum strategy based inexpensive passive index fund for bravehearted

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 underperforms it's index during next year and then cycle continues. For example, it exceeded index in 2017, 2018, 2020, 2022, 2024. However, it lagged index during other in-between years (2016, 2019, 2021, 2023). 

There is a saying in Wall Street that, "*This Year's Laggards Can Be Next Year's Leaders*". That seems to be often true in case of this momentum strategy.

So, in long term, this ETF rewards nicely to those investors who are *willing to stick* with it in spite of roller coaster surprise every other year. It underperformed broad market by 10% in 2023, but outperformed by 20% (perhaps NVDA effect) in 2024. Based on its above pattern, it's likely to significantly underperform broad market in 2025. 

It's valuation (P/E ratio) is 15% more than VTI. However, it's L/T earning growth projections is 10% more than VTI. So valuation premium can be mainly justified by higher total return potential. Also, it's standard deviation (volatility) is very similar to that of VTI.

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