The $3 billion MTUM follows the MSCI USA Momentum Index and holds 124 stocks. As is par for the course with many growth and momentum strategies, MTUM features large weights to the technology and consumer discretionary sectors. Alone, technology is almost 32% of the ETF’s weight while consumer cyclicals represent over 14%.
The momentum strategy basically bets that hot movers will continue to rise, so investors would buy high and sell even higher. Investors who want to follow this momentum strategy will be betting on outperforming sectors flying even higher.
MTUM’s “concentration gives the fund slightly greater exposure to firm-specific risk than its peers, though it appears manageable. Despite this concentration, the fund has exhibited lower volatility than its peers, owing to its risk-adjusted selection criteria. The combination of its cost advantage, strong exposure to the momentum factor, and cost-efficient implementation make this the most attractive momentum ETF, in Morningstar’s view,” according to the research firm.
MTUM charges just 0.15% per year, which is a below average fee among smart beta ETFs.
For more information on alternative index-based exchange traded funds, visit our smart beta category.