Momentum can be difficult to stop and while the constant debate in the capital markets involves growth versus value, investors can’t forget about the momentum factor, especially if the economy can get back in full swing. One ETF that investors can look at when it comes to riding the wave of momentum is the iShares Edge MSCI USA Momentum Factor ETF (MTUM ).
The fund seeks to track the investment results of the MSCI USA Momentum Index. The fund generally will invest at least 90% of its assets in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents.
As far as the index goes, it consists of stocks exhibiting relatively higher momentum characteristics than the traditional market capitalization-weighted parent index, the MSCI USA Index, which includes U.S. large- and mid-capitalization stocks.
“The iShares Edge MSCI USA Momentum Factor ETF (MTUM) is one of the better performing single-factor funds with a modest year-to-date decline of 0.58%,” a Financial Advisor article noted. “The fund assigns a momentum score to approximately 100 to 150 large- and mid-cap stocks for inclusion in its underlying index. MTUM is heavily weighted in the technology sector (31%), which has contributed significantly to the fund’s outperformance versus its peers.”
Riding Tech’s Momentum
The technology sector, in particular, is continuing to ride a wave of momentum that was spurred by FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks.
Here are a few funds investors can consider:
- Technology Select Sector SPDR ETF (XLK ): tries to reflect the performance of the Technology Select Sector Index, which is comprised of technology and telecom sector of the S&P 500. The ETF includes companies from technology hardware, storage, and peripherals; software; diversified telecommunication services; communications equipment; semiconductors and semiconductor equipment; internet software and services; IT services; electronic equipment, instruments and components; and wireless telecommunication services.
- Fidelity MSCI Information Technology Index ETF (FTEC ): tries to reflect the performance of the Nasdaq-100 Technology Sector Index, which consists of companies in the Nasdaq-100 Index classified as technology according to the Industry Classification Benchmark. QTEC currently holds 34 components and more-or-less equally weights its holdings.
- iShares U.S. Technology ETF (IYW ): reflects the performance of the Dow Jones U.S. Information Technology Index, which includes all tech sector picks in the Dow Jones U.S. Index. Due to the Dow Jones’ classification of information tech names, healthcare technology stocks may be included while payment technology stocks are excluded.