Transcription
My hope is that you watch my channel, but not just because you follow blindly with what I say, but that you actually want to learn and better yourself. I'm not going to hold you hostage and wait until the middle of this video to actually let you know what this ETF is. I'm going to go ahead and tell you right up front, but my hope is that you're not just someone who hears the ETF name, then goes and buys it. My hope is that you watch the video and form your own ideas about this ETF and that it starts your research off for you. I know for me it's absolutely supercharging my portfolio right now.
So, I'll explain what this ETF is, give you some quick highlights so you know how it works and how it's different than almost everything else out there, where specifically it fits within the three fund portfolio, and how to invest in it for the rest of 2025. This ETF is called the Invesco S&P 500 Momentum ETF, ticker SPMO. And when they say momentum, they really mean it. This ETF inception date is 2015. So we have 10 years of data. And on average, the fund is producing an average yearly appreciation of 18.5% since inception. It has a year-to-date return right now in 2025 of 22.43%, 43% a one-year return of 35.66% an average return over 3 years of 29.18% per year and a 5-year average of over 21% per year.
Let me put this into perspective. Had you invested in this fund 5 years ago with $100,000 and each month put $1,000 in with an average return of 21.24% per year that it's had. Today, just five years later, you would be at $353,457. If you decided to just stop investing and not invest another single dollar and just had it sit in SPMO for the next 5 years and that average rate of return continued, you'd be at $925,94. That's off of just 10 years of returns and only investing new money for five of those years. I hope this got your attention. And for those of you that actually take the time to learn why this ETF is doing what it's doing, you're going to be light years ahead of your friends very quickly. My name is Nolan Goa. My students call me Professor G, and I made this channel to make investing simplified.
So, the Invesco S&P 500 momentum ETF, it's all about this idea of momentum. It basically finds the absolute best, strongest, most momentumbearing companies within the S&P 500 and made an ETF of the hundred top momentumfilled companies. This is why when we look at the chart of SPMO versus the S&P 500, you can see that SPMO is clearly crushing it. The light blue line is S&P 500 and the dark blue line is SPMO. VU, which is the ETF that tracks the S&P 500, is up about 84% in the past 5 years. SPMO is up 130% in the past 5 years. That is a substantial difference. That's huge.
But look at this, which actually makes me even more excited. Here's the yearly returns broken out for you for VU. The two specifically to pay attention to are the bad years. So 2018 and 2022. In 2018, the S&P 500 returned a negative 4.5%. And then in 2022, one of the bigger drops ever, it returned a negative 18%. Now, here's the yearly returns broken out for you for SPMO. Yes, I love the high highs, but even more, I love the higher lows. Specifically, look at 2018 and 2022. Remember VU had a negative 4.5% for 2018. SPMO only dropped negative.9% in 2018. Remember VU dropped over 18% in 2022. SPMO only dropped a negative 10.46%. These are huge. If we can find an ETF that outperformed the S&P 500 in the good years, but then doesn't drop as far, doesn't have as big of drawdowns in the bad years, that's called a unicorn.
To further this point, we all know about QQQM. It's a great growth ETF. Looking at the yearly returns of QQQM, we can see that it does go up even higher than that of SPMO. But look at 2022. it dropped negative 32.52% during that year. Usually these growth style ETFs will jump much higher than market or foundational style ETFs, but then in a market crash, they crash super super hard. SPMO is flipping that on its head by having years where it outperforms the market average, but then on the bad years it has higher lows or drawdowns, making it much safer for your portfolio overall.
So what is momentum? If you understand this, you're going to understand the secret. I always like to go to the actual prospectus on the company website. So, SPMO is designed to measure the performance of approximately a 100 stocks in the S&P 500 that have the highest momentum score. In general, momentum is the tendency of an investment to exhibit persistence in its relative performance. A momentum style of investing emphasizes investing in securities that have had better recent performance compared to other securities. The momentum score for each security included in the underlying index is based on price movements and volatility of the security as compared to other eligible securities within the S&P 500.
Now, this is where it actually tells you how it really builds it out. This is what I like the most. In selecting constituent securities for the underlying index, the index provider first calculates the momentum score of each stock in the S&P 500 by evaluating the percentage change in the stock's price over the last 12 months, excluding the most recent month, and applying an adjustment based on the security's volatility over that period. Volatility is a statistical measurement of the magnitude of up and down asset price fluctuations, increases or decreases in a stock's price over time. The index provider then selects approximately 100 stocks with the highest momentum score for inclusion in the underlying index. So all that explains how the actual stocks are chosen.
But let me show you what's actually inside of this SPMO. If you see here, the fund is actually quite diversified with no one sector taking up more than 23% of the fund, which is solid. The top sectors are understandably information technology, financials, consumer discretionary, and then communication services. The top holdings are Nvidia, Meta, Amazon, Broadcom, JP Morgan, Tesla, Walmart, Netflix, Palunteer, and Costco. in many growth style ETFs that you're invested in. I'm sure you see a lot of Apple and Microsoft, but the fact that we don't see a lot of that here is actually really good for diversifying your portfolio outside of some of those top market cap weighted style ETFs. The ETF is rebalanced semianually, meaning it automatically rotates into the newest set of leaders, capturing market trends without you needing to time trades. This is huge because things flip on a dime. And so knowing that all you have to do is buy into this ETF and they're going to take care of that work for you, that's pretty sweet.
With such a cool buildup of the portfolio and such solid return, I'd expect this thing to have a high fee. But it actually has a lower fee than that of like QQQ or QQQM. The fee of SPMO is only.13%. Now, at this point, I'm sure you're thinking to yourself, "Well, if this fund is basically the best part of the S&P 500, it's beating the S&P 500 in return, and it doesn't have as big of a drawdown as the S&P 500 in bad times, why not just cash in VU and just go allin for SPMO?" The main reason is definitely going to be because of risk. And this is coming from its actual prospectus. Again, the momentum style of investing is subject to the risk that the securities may be more volatile than the market as a whole or that the returns on securities that previously have exhibited price momentum are less than the returns on other styles of investing. Momentum can turn quickly and stocks that previously have exhibited high momentum may not experience continued positive momentum. In addition, there may be periods when the momentum style of investing is out of favor and therefore the investment performance of the fund may suffer. And I've actually seen that this year. There was a period of time a couple of times so far this year where the S&P 500 maybe dropped about 1% but SPMO actually dropped like 1.5 up to 2%. In the short term, SPMO can definitely be more volatile and especially since SPMO has 20% of the fund currently in just Nvidia and Meta alone. If both of those companies have a bad quarter and crash, SPMO is going to crash heavily, whereas the S&P 500 is just going to drop a couple of percentage points.
So, where does this ETF fit into the three fund portfolio? It is truly a unicorn. The whole point of the three fund portfolio is to have the foundational portion be your foundation. Like building a house, you want a strong foundation. And the strongest foundation in terms of ETFs is either the S&P 500 or the total US stock market index because of its crazy history. Then you want to have an ETF that has a lower beta or lower volatility than the S&P 500 and thus has lower draw downs or higher lows. This would be like SCHD or VM or a value ETF. Then you'd want an ETF that gives you the possibility of higher reward but will come with the higher risk and that would be a solid broad growth ETF like QQQM, SCHG or VUG. SPMO is literally taking the best companies of the foundational ETF the S&P 500. So it could be considered foundational. It has high returns and a bit higher volatility short-term, so it can be considered growth. It also has better drawdowns like we saw in 20122 versus the S&P 500, so it could be considered somewhat value territory. It almost fits into all categories.
I would add this into the portfolio in a couple of ways, but do what's best for you and based off of your investing thesis. First would be that I would be very comfortable converting my beloved three fund portfolio into a 4un portfolio and just holding 25% of each category equally. So 25% value, 25% foundational, 25% SPMO and 25% growth. Another way and the way that I personally do look at this is that I see SPMO more so as a hybrid between foundational and growth. So for me, I'd want to see what my portfolio allocations are and my goal. If my goal before this was to go 40% value, 30% foundational, 30% growth, then I'd take equally from both foundational and growth and go as follows. 40% value, 20% foundational, 20% SPMO, 20% growth. It's your portfolio, so you can go as heavy or as light as you'd like.
For 2025, I'm investing in SPMO as follows. I really like it in a taxable account because the dividend is only 0.5%. So, it's a very low dividend, meaning that it's taking all of its growth and it's growing in a taxefficient way. It's one of the best ways to use the taxable account because then you're not being taxed on dividends as it grows. On the flip side though, I do like the fact that it's going to grow much more than most things. And so if it's in something like a Roth IRA, then basically you're getting tax-free growth and that's a huge benefit. So I actually like SPMO in both the taxable brokerage and the Roth IRA. I'm mixing it in within my three fund portfolio personally, but for me, I'm looking at it more so in the growth section as a whole. I have my three fund portfolio set up as 33.3% in each category. So for now, my ETF portfolio is about 33.3% SCHD in value, 33.3% S&P 500, and then in that growth category, it's about 12% SCHG, 11% QQQM, and about 10% SPMO. I continue to dollar cost average into all of these each and every month, no matter what the price is. I believe wholeheartedly that 10 years from now, no matter what the price is today, it's going to be much, much higher in 10 years. There's going to be dips here and there, and I'm just going to continue to invest more at that point.
To learn more about that three fund portfolio and the exact percentages based off of your age, watch this video here. If you've already watched that one, watch this one to keep you going strong in investing. Remember to keep investing simplified.