Momentum—once it picks up, it can be difficult to stop and while the debate in the capital markets is whether value can sustain its lead over growth, investors can’t forget about the momentum factor, especially if events like a U.S.-China trade deal can spark a year-end rally.
Investors can take advantage of factor-based exchange-traded funds (ETFs) that specifically capitalize on momentum. They can start by looking at the 10 largest based on assets under management (AUM) year to date.
At the top of the list is the iShares Edge MSCI USA Momentum Factor ETF (BATS: MTUM), which has been yielding gains of over 19% YTD. 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.