Vanguard us Momentum Factor ETF (VFMO -2.90 %) Defeat slightly S & P 500 2024. However, as of January 26, it has increased by 6.3 % so far, exceeding the 3.7 % increase in S & P 500.
The following are the reasons why Exchange-Traded Fund (ETF) is one of the more unique ETFs, why you can exceed S & P 500, and why investors want to be careful when approaching funds. 。
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Understanding quantitative funds
Vanguard US Momentum Factor ETF is a term “momentum” to invest in the stock with the most recent performance using a rule -based quantitative model. The fund is piled up in hot stocks and abandoned low -performance names.
The strategy works well if the hot stock is hot. This was mainly so in recent years.
The fund is unique because it is very diversified. It has 693 shares that do not have individuals that make up 1 % or more of the fund. This is a completely different structure from a very high -top heavy S & P 500. Only 10 companies account for an amazing 38.6 % VANGUARD S & P 500 ETF (Voo -1.39 %)On the other hand, only 9.2 % of the funds of the Momentum ETF consist of 9.2 % of the fund.
The S & P 500 is the weight of the market cap, so the most valuable companies have the best weight. However, the Momentum ETF is not the weight of the market cap. It holds it, including small stocks, intermediate shares, and large companies, but most of the top holding is a large cap.
for example, nvidia This is the second most valuable company in S & P 500. apple。 NVIDIA has a 6.6 % weight in Vanguard S & P 500 ETF. In addition, at the rapid stage of 2023 and 2024, it is also the top 10 of the momentum ETF. However, NVIDIA accounts for only 0.8 % of the Fund because the Momentum ETF is very diversified.
No matter what
Led by Apple and NVIDIA because the value of the technology sector is growing greatly Microsoft,, BroadcomAnd and other names, it is currently a tremendous 32.5 % of Vanguard S & P 500 ETF. Tech has a lot of momentum, so it's an important sector of Momentum ETF, but it's not much dominant. In fact, the largest weighted sector at the time of this writing ETF is finance, with 22.6 % weight, then 19.99 % of industries and 15 % consumer discretion.
The finances are reddish. This was one of the best performance sectors in 2024, moving forward in 2025. visa,, Master cardand American Express Hit the highest price ever.
Scanning the list of Momentum ETF holding a list will give you some interesting discoveries. For example, the energy division dropped significantly to S & P 500 in 2024. So Williams company and ONEOKIt is known as income shares rather than growth shares, but both are one of the top 20 shares of ETF.
Similarly, At & T -The high -yield sturdy companies that have earned 18.4 % in the past six months are the top 20 holdings. Wal -MartThe dividend king, who raised the payment for more than 50 years, was extremely proud of the tremendous 71.9 % in 2024.
An important point is that fund holding can change significantly based on recent performance. When the high -tech stock cools down, the US momentum ETF shifts to other sector, but the S & P 500 has a lot of technology, so high -tech stocks may fall by 50 %, which is the largest index sector.
Data data YCharts.
How to approach exercise ETF
With its structure, ETFs contrary to the principle of long -term investors. This is to identify companies that believe that the value will increase over time and will maintain those positions throughout volatility. In contrast, Momentum ETF trades everything hot in the market.
When looking at the ETF to buy, it is best to build it together with companies and themes. For example, I want to invest in a wider market, but like a value stock VANGUARD VALUE ETF。 Instead, like growth inventory? Then then Vanguard Growth ETF。
The holding of these funds does not change much. Rather, the weight fluctuates based on the performance. Therefore, you can approach funds through long -term investment lenses.
In general, most investors should target other low -cost vanguard ETFs, including their favorite top holdings, rather than driving their heads in US momentum ETFs.
The U.S. momentum factor ETF is about purchasing a rise in shares, and the evaluation or basics are not taken into account. Therefore, if you are an investor who focuses on value or is a risk avoidance, you can use ETF like a red heat market hedge.
Another interesting quality of the ETF is that it can work surprisingly well while selling a large growth stock. For example, in 2022, the fund lost 14.3 %, which was not as bad as 19.4 % of S & P 500 or 33.1 % fall. NASDAQ COMPOSITE。 This is because the configuration of the index does not actually change in the bear market, but the US momentum ETF is sold out to the functions based on its quantitative models.
In the long term, this strategy has been shown to be a fairly unusual effort. The U.S. exercise factor ETF has generated 141.5 % of total profits in the past decade, with 157.6 % of S & P 500 and 202.2 % for NASDAQ composite materials.
Again, US momentum ETF should be more common as a tool, not an ETF for building a portfolio. However, some investors may want to completely avoid funds and focus on simpler investment vehicles.
American Express is a Motley Fool Money advertising partner. Daniel Fallbar has no position in either of the shares mentioned. Motley fools include Apple, MasterCard, Microsoft, NVIDIA, Vanguard Index Funds -Vanguard Growth ETF, VANGUARD S & P 500. Introducing and recommending Walmart. Motley Fool recommends Broadcom and ONEOK and recommend the following options: A $ 395 phone call at Microsoft in January 2026 and a $ 405 call to the short -term Microsoft in January 2026. Motley fools have a disclosure policy.
