A high-growth momentum strategy focused on the Invesco S&P 500® Momentum ETF with a tech tilt
Report created on Aug 3, 2025Risk profile
5/7
Diversification profile
2/5
Positions
-
SP Invesco S&P 500® Momentum ETF
SPMO - US46138E3392 100.00%
The portfolio is entirely invested in the Invesco S&P 500® Momentum ETF, indicating a focused strategy on U.S. equities with momentum. This ETF selects stocks from the S&P 500 that have increased in price the most over the past year, aiming to capture growth trends. The sectoral distribution shows a heavy emphasis on Technology, Financial Services, and Consumer Cyclicals, which are sectors often associated with higher growth but also higher volatility. The complete allocation to stocks and the absence of other asset classes like bonds or commodities suggest a lack of diversification, which could increase risk.
Growth
Historically, this portfolio has demonstrated a Compound Annual Growth Rate (CAGR) of 22.02%, which is impressive. However, it's important to note the maximum drawdown of -30.93%, indicating significant volatility and potential for large losses during market downturns. The days contributing to 90% of returns being limited to 38 suggests that the portfolio's gains are highly concentrated in short, strong market rallies, which can be risky if the timing is not optimal for entry or exit.
Projection
Monte Carlo simulations, using historical data to forecast future performance, show a wide range of outcomes, from a 324% increase at the 5th percentile to a 2,566.3% increase at the 67th percentile. This suggests a high potential for growth but also underscores the uncertainty and risk inherent in this strategy. It's crucial to understand that these projections, while useful for planning, cannot guarantee future results due to market unpredictability.
Asset classes
- Stocks 100%
The portfolio's allocation to 100% stocks, specifically within the S&P 500 Momentum ETF, indicates a high-risk, high-reward strategy. While equities can offer substantial growth over time, the absence of other asset classes like bonds or real estate means there's no buffer against stock market volatility. Diversifying across different asset classes can help mitigate risk and smooth out returns over time.
Sectors
- Technology 23%
- Financials 20%
- Consumer Discretionary 15%
- Telecommunications 15%
- Consumer Staples 9%
- Industrials 9%
- Utilities 3%
- Health Care 2%
- Energy 2%
- Real Estate 1%
The sectoral allocation leans heavily towards Technology, Financial Services, and Consumer Cyclicals, sectors known for their growth potential. However, this concentration also exposes the portfolio to sector-specific risks, such as regulatory changes or economic cycles that disproportionately affect these industries. Balancing the sector exposure can reduce volatility and improve resilience against market shifts.
Regions
- North America 100%
With 100% of assets allocated in North America, the portfolio lacks geographical diversification. While the U.S. market is a significant component of the global economy, international exposure can provide access to growth opportunities in emerging markets and reduce the impact of regional economic downturns. Expanding geographically could enhance returns and reduce risk over the long term.
Market capitalization
- Mega-cap 54%
- Large-cap 35%
- Mid-cap 11%
The focus on Mega and Big cap stocks (89% combined) aligns with the momentum strategy's goal to invest in established companies with strong growth trends. However, the limited exposure to Medium and no exposure to Small cap stocks means potentially missing out on higher growth opportunities offered by smaller companies, which can sometimes outperform larger counterparts.
Dividends
- Invesco S&P 500® Momentum ETF 0.60%
- Weighted yield (per year) 0.60%
The dividend yield of 0.60% is relatively low, which is typical for growth-focused investments prioritizing capital appreciation over income. For investors seeking regular income, this may not be ideal. However, for those focused on long-term growth, reinvesting these dividends can compound growth, albeit modestly in this case.
Ongoing product costs
- Invesco S&P 500® Momentum ETF 0.13%
- Weighted costs total (per year) 0.13%
The Total Expense Ratio (TER) of 0.13% is impressively low, which is beneficial for long-term growth as it minimizes the drag on performance. Keeping costs low is crucial in maximizing returns, especially in strategies where the expected outperformance margin over the market is slim.
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