SPMO ETF

The Invesco S&P 500 Momentum ETF has outperformed the S&P 500, delivering 315% returns over the last decade, compared to 243.6% for the broader index. SPMO's targeted approach focuses on the top 100 momentum stocks in the S&P 500, making it well-suited for challenging economic conditions. With an expense ratio of 0.13% and a diversified sector allocation, SPMO balances cyclical and defensive industries effectively.

SPMO's momentum strategy is effective but currently risky due to high concentration in top 10 holdings, now at nearly 60%. The spread analysis shows clear signs of overconcentration and overstretching in the SPMO ETF. Looking ahead to Q4, the risk of starting or continuing a purchasing plan is also discouraged by the seasonality analysis.

I transitioned from individual stocks to ETFs due to time constraints and emotional capacity, focusing on asset allocation and risk management. I chose the Invesco S&P 500 Momentum ETF for its strong performance metrics, including a high Sharpe Ratio and Sortino Ratio. SPMO's top holdings include NVIDIA, Apple, and Microsoft, with a historical beta of 0.93, indicating manageable volatility.

The Invesco S&P 500 Momentum ETF offers a reasonable 0.14% expense ratio and has outperformed the S&P 500 over the past decade. The ETF tracks the S&P 500 Momentum Index, rebalancing semi-annually, which reduces trading costs but dilutes the momentum factor. Infrequent rebalancing introduces timing luck, affecting momentum capture and making it easier for traders to front-run the ETF.

Momentum factor funds have performed very well YoY, with SPMO rising twice as fast as the S&P 500 due to its exposure to the "AI trade." As Nvidia, Apple, Microsoft, and others dominate SPMO, it is more exposed to the risk of a burst of the retail-driven "AI bubble." Low individual investor cash allocations may be a solid bearish indication for stocks that are more popular among individual investors.

Invesco S&P 500 Momentum ETF focuses on high-momentum stocks in the S&P 500, rebalancing twice a year for a performance boost. The fund holds 101 positions, with Nvidia as the largest holding at 13.17%, heavily concentrated in the Information Technology sector. Momentum investing can lead to strong returns but also carries the risk of sharp reversals and sector-specific downturns, making it a potentially volatile investment option.

Momentum factor has shown excess returns in various assets over a 215-year period. Invesco S&P 500® Momentum ETF partially mitigates risks associated with momentum investing. SPMO fund uses risk-adjusted momentum and focuses on higher volatility in bear markets to enhance returns.

The Invesco S&P 500 Momentum ETF has surpassed the S&P 500 in performance since its establishment in 2015. Momentum Index investing has proven effective, as it identifies companies with consistent growth that are rewarded by the market with increased valuations. The ETF selects the top 100 performing stocks, leading to quicker turnover of underperforming shares compared to the S&P 500.

The momentum factor has shown a recent deceleration, even though AI and semiconductor stocks have performed well. The Invesco S&P 500 Momentum ETF mainly targets US large caps and could potentially overlook global equities and additional gains from Chinese stocks. While SPMO has a reliable history and is cost-effective, investors should be mindful of its elevated valuation and possible short-term vulnerabilities.