Momentum ETF Gets A Lift From High-Flying Consumer, Tech Stocks

Potential investors should be aware that the momentum strategy typically works well under sustained market rallies and could breakdown during volatile conditions. For instance, the underlying benchmark underperformed the MSCI USA Index by 3.8% during the 2008 financial crisis.

Moreover, since momentum strategies can overweight riskier stocks, the ETF could could underperform during another correction. Since defensive stocks typically do better during volatile conditions, the momentum strategy could load up on conservative picks and miss out on the initial recovery in riskier assets.

“MTUM tends to hold a relatively small basket of large- and midcap stocks,” notes IBD. “The ETF is overweight the economically sensitive technology sector, at a 39% portfolio weighting. A low 0.15% expense ratio gives the iShares momentum ETF a cost edge over its rivals.”

For more information on alternative index-based exchange traded funds, visit our smart beta category.

Tom Lydon’s clients own shares of Amazon and Facebook.

• Earn up to 4 CE Credit! Registration is open for the 2017 ETF Trends Virtual Conference on Wednesday, Feb. 8. To register or learn more, visit