TrendPilot · ETF Trend Trading Systems

Category: Strategy

  • What Is Dual Momentum Investing and How Does It Work with ETFs?

    Dual momentum is a systematic ETF strategy that combines relative momentum (comparing assets to pick the strongest) with absolute momentum (checking whether the winner is worth owning at all). Created by Gary Antonacci and formalized in his 2015 book, it uses a simple monthly decision rule across just two or three ETFs. The strategy delivered ~17% annualized returns in its 40-year backtest with roughly one-fifth the drawdown of the S&P 500 — though real-world results since publication have been more mixed, which matters for setting expectations.

    The short version

    • Dual momentum = relative momentum (which asset is strongest?) + absolute momentum (is it worth owning?)
    • The classic implementation is Global Equity Momentum (GEM): compare SPY vs EFA, buy the 12-month winner if it beats T-bills, otherwise buy AGG bonds
    • Rebalanced monthly — about 5 minutes of work per month
    • Backtest (1974–2013): ~17% annual return, ~10% max drawdown vs S&P 500’s 10% return and 51% drawdown
    • Post-publication (2014–2022): underperformed buy-and-hold during the long US bull market — this is expected behavior, not a flaw
    • Minimum account size: ~$5,000
    • Tax efficiency: moderate — monthly rebalancing can trigger short-term capital gains

    What exactly is dual momentum?

    Dual momentum is a rules-based tactical asset allocation strategy. It applies two distinct momentum filters before deciding what to buy:

    Relative momentum (cross-sectional): Among a defined set of assets, which one has performed best over the lookback period (typically 12 months)? The winner gets the allocation. This is the “which one?” question.

    Absolute momentum (time-series): Is the winning asset actually in an uptrend? The strategy compares the winner’s return against a risk-free benchmark (T-bills). If the winner can’t beat T-bills, the strategy moves to defensive bonds. This is the “should I own it at all?” question.

    By combining both filters, dual momentum avoids two common pitfalls: buying a weak asset just because it’s the “best of a bad bunch” (relative momentum alone), and buying a strong rising asset without checking whether the broad trend supports it (absolute momentum alone).

    Who created dual momentum?

    Gary Antonacci, an independent researcher, published the framework in his 2012 SSRN paper “Risk Premia Harvesting Through Dual Momentum” and expanded it into the 2015 book Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk. Antonacci didn’t discover momentum as a market anomaly — that credit belongs to academics Jegadeesh and Titman (1993) — but he was the first to package relative and absolute momentum into a single executable system for retail investors.

    The academic foundation runs deep. Jegadeesh and Titman (1993, confirmed 2001) showed stocks with strong 3–12 month returns continued to outperform. Asness, Moskowitz, and Pedersen (2013) at AQR Capital extended this across global stocks, bonds, commodities, and currencies. Momentum is widely considered the most persistent market anomaly. Antonacci’s contribution was making it practical: two ETFs, one comparison, one decision per month.

    How does the Global Equity Momentum (GEM) strategy work?

    GEM is the most popular implementation of dual momentum. Here is the exact decision rule:

    1. Compare the 12-month total return of SPY (US equities) vs EFA (developed international equities).
    2. If the winner’s 12-month return is higher than the 1-month T-bill rate, buy that winner.
    3. If both SPY and EFA have negative absolute momentum (below T-bills), buy AGG (US aggregate bonds).
    4. Rebalance once per month. No adjustments between monthly signals.

    That’s the entire strategy. Twelve decisions per year, most taking under a minute. The bond position is the “risk-off” parking spot — it preserves capital until one of the equity ETFs re-establishes positive absolute momentum.

    What ETFs do you need for dual momentum?

    ETFTickerRoleExpense Ratio
    SPDR S&P 500 TrustSPYUS large-cap equities0.09%
    iShares MSCI EAFE ETFEFADeveloped international equities0.33%
    iShares Core US Aggregate Bond ETFAGGDefensive bond position0.03%

    These are the three ETFs used in the standard GEM model. Some practitioners substitute VTI for SPY (total US market instead of S&P 500) or BND for AGG, but the core selection logic remains identical. Antonacci’s own backtests used index data rather than specific ETFs, so these tickers are practical approximations vetted by the community.

    Account minimum: because GEM holds only one ETF at a time and AGG trades at roughly $100/share, the strategy works with accounts as small as $5,000. Larger accounts benefit from lower trading costs as a percentage of position size.

    How do you calculate the signals each month?

    You need two pieces of data for each ETF: the current price and the price from 12 months ago. Most brokers provide 12-month return figures directly. Alternatively, you can calculate it manually:

    1. Get the adjusted close price of SPY and EFA from 12 months ago and today.
    2. Calculate 12-month return = (current price / price 12 months ago) — 1.
    3. Get the 1-month T-bill rate (available at Treasury.gov or via your broker).
    4. Apply the GEM decision rule above.
    5. If the signal changes, place the trade. If it stays the same, do nothing.

    For retail traders who don’t want to calculate this manually each month, several services publish the GEM signal: Antonacci’s own Optimal Momentum site, and tools like Reblnc provide automated signal tracking. The Quant Investing ETF Momentum dashboard also ranks ETFs by 12-month return across global markets.

    What performance did the backtest show?

    Antonacci’s backtest running from 1974 through 2013 showed these results (source: Antonacci, 2012 SSRN paper):

    MetricGEM (Dual Momentum)S&P 500 Buy-and-Hold60/40 Portfolio
    Annualized return~17%~10%~10%
    Max drawdown~10%~51%~27%
    Period1974–20131974–20131974–2013

    The drawdown comparison is the standout finding. GEM’s worst peak-to-trough loss was roughly 10%, versus 51% for buy-and-hold during the 2000 dot-com crash and 2008 financial crisis. The absolute momentum filter rotated the portfolio to bonds before the worst losses materialized, then rotated back to equities once trends re-established. Independent analyses using ETF data (which are constrained by shorter ETF lifespans) broadly confirm the pattern, though the magnitude of outperformance is smaller over the ETF-only period.

    How did dual momentum perform after publication?

    This matters because backtests are not reality. From roughly 2014 through 2022, GEM underperformed a simple S&P 500 buy-and-hold. The reasons are straightforward and honest:

    • The US bull market ran for years with shallow corrections — GEM’s defensive trigger rarely activated
    • When GEM rotated to international equities (EFA), it significantly underperformed SPY due to US market dominance
    • Whipsaw trades — brief signals that reversed quickly — generated transaction costs and caused the strategy to miss parts of rallies

    This is not a sign the strategy is broken. Long bull markets with shallow drawdowns are the worst-case scenario for any trend-following approach. GEM is designed to protect against crashes, not to maximize returns when the market goes up almost every year. The strategy did what it was supposed to do in March 2020 — rotated to bonds ahead of the COVID crash, then back to equities in April — but the crash and recovery were so fast that some investors missed the rotation entirely.

    GEM remains the benchmark that tactical ETF strategies are measured against precisely because its rules are fully transparent and independently verifiable. No black box, no proprietary indicators, no data mining.

    What are the limitations of dual momentum?

    Every strategy has weaknesses. Dual momentum’s are well-documented:

    • Underperforms in long bull markets. As noted above, the defensive mechanism is a drag when drawdowns are shallow and brief.
    • Tax inefficiency. Monthly rebalancing means holdings rarely qualify for long-term capital gains treatment. Best used in tax-advantaged accounts (IRA, 401k).
    • Bond correlation risk. In a rising-rate environment, AGG can fall alongside equities, reducing the defensive benefit.
    • Whipsaw in choppy markets. When the 12-month return oscillates around the T-bill threshold, the strategy can trigger multiple round-trip trades in short succession.
    • US-centric. GEM only considers US and developed international equities. It misses emerging markets, sector rotation, and other diversifiers that some modified dual momentum strategies include.

    These limitations have directly shaped the next generation of tactical strategies — HAA (Heritage Asset Allocation) and DAA (Defensive Asset Allocation) were designed specifically to address GEM’s weaknesses while preserving its core logic.

    How is dual momentum different from simple momentum?

    “Simple momentum” strategies typically use only relative momentum: rank assets by recent performance and buy the top one (or top few). The problem is that during a broad market crash, the “best” asset might still be down 20%. You’re buying the least bad option in a bad market.

    Dual momentum’s second filter — absolute momentum — solves this. It checks whether the winner is in an actual uptrend. If no asset passes the absolute momentum test, the strategy exits to bonds or cash. This is what protected the 1974–2013 backtest from large drawdowns: during the 2008 financial crisis, both SPY and EFA had negative 12-month returns, so GEM sat in AGG and avoided the worst of the crash.

    This makes dual momentum more conservative than pure momentum. You sacrifice some upside during strong bull markets in exchange for crash protection. Whether that trade-off suits you depends on your personal risk tolerance.

    Quick self-check

    Test your understanding of dual momentum with these three questions.

    What are the two types of momentum in dual momentum?

    Relative momentum (cross-sectional — comparing assets to find the strongest) and absolute momentum (time-series — checking if the winning asset is in an uptrend relative to T-bills). Both must be applied together; using only one misses the strategy’s core protection.

    When does GEM rotate to bonds instead of holding equities?

    When the winner of the SPY vs EFA comparison fails the absolute momentum test — meaning its 12-month return is lower than the 1-month T-bill rate. In that case, the strategy buys AGG (US aggregate bonds) until one of the equity ETFs re-establishes positive absolute momentum.

    Why did GEM underperform buy-and-hold from 2014 to 2022?

    The US bull market had very shallow drawdowns, so GEM’s defensive trigger rarely activated. When it did rotate to international equities (EFA), those significantly underperformed US stocks, and brief whipsaw signals caused the strategy to miss parts of rallies. This is expected for any crash-protection strategy during a long, low-volatility bull run.

    Frequently asked questions

    Can I run dual momentum in a small account?

    Yes. Since GEM holds only one ETF at a time and the cheapest option (AGG) trades around $100/share, accounts of $5,000 or more can implement it efficiently. Some brokers offer fractional shares, further lowering the barrier.

    What lookback period does dual momentum use?

    The standard is 12 months, based on Jegadeesh and Titman’s academic research showing the 3–12 month window produces the strongest momentum effect. Antonacci tested various periods and settled on 12 months as the best balance of responsiveness and signal reliability for the GEM model.

    Does dual momentum work in bear markets?

    That’s where it performs best. During extended downturns, the absolute momentum filter rotates to bonds before the worst losses hit. In the 2008 financial crisis, GEM avoided most of the ~50% S&P 500 drawdown by holding bonds. The strategy is specifically designed for crash protection, not bull market maximization.

    Can I add more ETFs to the dual momentum universe?

    Yes. Many practitioners create expanded versions that include emerging markets (EEM), REITs (VNQ), gold (GLD), or sector ETFs. This is sometimes called “sector rotation dual momentum.” The trade-off is more possible signals to track and potentially more whipsaw trades. Start with the classic three-ETF GEM before experimenting.

    Is dual momentum suitable for retirement accounts?

    Yes — in fact, retirement accounts are the natural home for this strategy. Since monthly rebalancing triggers mostly short-term capital gains, holding GEM in a tax-advantaged account (IRA, 401k, SIPP) avoids the tax drag. The lower drawdown risk also suits investors who cannot afford a 50% portfolio loss near retirement.

    Educational content only — not financial advice. Past performance does not guarantee future results. Trading involves risk of loss. Disclaimer · Affiliate disclosure

  • ETF Technical Analysis: How to Read ETF Charts and Indicators

    ETF technical analysis is reading a fund’s price chart and indicators to spot trends and time entries and exits, the same way you would analyze a single stock. It works on ETFs because they trade on an exchange throughout the day, producing the same price and volume data as any other security.

    Can you do technical analysis on ETFs?

    Yes, and the tools are identical. A moving average, a momentum indicator, and a volume bar all work on an ETF chart exactly as they do on a stock chart. The one real difference is breadth: a broad index ETF holds hundreds of names, so it is more diversified than a single stock. That means signals driven by one company’s news are less relevant, and some short-term chart patterns are weaker on a diversified fund than on an individual name. Long-term trend signals, by contrast, tend to be cleaner on a broad ETF because the noise of a single stock is averaged out.

    The indicators that matter most for ETFs

    • Moving averages. The 200-day simple moving average is the standard trend filter for ETFs. See which moving average to use and the documented 200-day rule example.
    • Momentum indicators. RSI and MACD show whether a move is strengthening or fading.
    • Relative strength. Comparing an ETF against its benchmark or peers shows leadership. See relative strength ETFs.
    • Volume. Rising volume on a breakout confirms it; falling volume on a rally is a warning sign.

    Chart patterns and the honest caveat

    Support, resistance, and breakouts appear on ETF charts just as they do on stocks. The caveat is that a broad ETF is a portfolio, not a company, so patterns that depend on a single business’s story carry less weight. In practice, most ETF technical analysis leans on trend and momentum rather than micro patterns, because a diversified fund trends more reliably than it carves precise formations.

    Analyze any ETF in three steps

    Here is a repeatable method you can run on any free chart in a few minutes. First, pull up the ETF and add a 200-day simple moving average: is price above or below it? Above means the long-term trend is up. Second, add an RSI or MACD to check whether the move is strong or stretched. Third, compare the ETF’s recent return against the broader market to read its relative strength. Those three checks, trend, momentum, and relative strength, are the whole game, and they are the same logic our backtest calculator replays on your own price data.

    The best tools to analyze ETFs

    You need two things: a charting tool for indicators and a screener for filtering. Free options like TradingView or your broker’s chart cover the indicators, and ETF screeners let you sort by performance, fees, and flows. On top of that, our free tools handle the parts screeners do not: testing a trend rule and ranking your watchlist by momentum.

    FAQ

    Can you do technical analysis on ETFs?

    Yes. ETFs trade on an exchange the same way stocks do, so the same tools work: moving averages, momentum indicators, volume, and relative strength. The one difference is that a broad index ETF is more diversified than a single stock, so signals tied to one company’s news are less relevant, and some short-term chart patterns can be weaker.

    What is the best tool to analyze ETFs?

    For most investors, a free charting tool (TradingView or your broker’s built-in charts) plus an ETF screener covers it. You need charts for indicators and a screener for filtering by performance, fees, and flows. Our free backtest calculator and momentum ranker handle the trend and ranking side.

    What is the 3:5:10 rule for ETFs?

    The 3:5:10 rule is a Securities and Exchange Commission limit on funds investing in other funds, from Section 12(d)(1) of the Investment Company Act of 1940. A fund may not buy more than 3% of another fund’s shares, invest more than 5% of its own assets in a single fund, or more than 10% of its assets in funds overall. It is an anti-pyramiding rule for fund-of-funds arrangements, not a personal allocation rule for individual investors.

    What did Warren Buffett say about ETFs?

    Buffett has repeatedly recommended a low-cost S&P 500 index fund for most investors, and his estate instructions direct 90% of the money for his wife into an S&P 500 index fund. That is a buy-and-hold index recommendation, not a technical analysis strategy.

    Disclaimer: Educational content only, not financial advice. Technical analysis describes what has happened, not what will happen next. Full disclaimer and affiliate disclosure.

  • Best Moving Average for ETF Trading: SMA vs EMA and Settings

    The best moving average for ETF trading depends on your holding period, but the 200-day simple moving average is the standard for long-term trend following. Shorter averages suit faster traders, and there is no single number that beats all others.

    SMA versus EMA

    A simple moving average (SMA) is the plain average of the last N closing prices. An exponential moving average (EMA) weights recent prices more heavily, so it turns sooner. For ETF trend following, the 200-day SMA is the benchmark most rules are built on, because it is slow enough to ignore noise. Traders who want earlier entries and exits often swap in an EMA or a shorter lookback, accepting more whipsaw trades in exchange.

    Common settings and what they are for

    • 50-day. Short-term trend; used for entries, exits, and as the fast line in a crossover.
    • 100-day. Intermediate trend; a middle ground between noise and lag.
    • 200-day. Long-term trend; the classic invest-versus-cash filter. See our documented 200-day rule example.

    Moving average crossovers

    A crossover strategy holds the ETF while a short average is above a long average and moves to cash when it flips. The 50-day crossing the 200-day is the most common version. The trade-off is built in: crossovers are always late, so they give back part of every move at the top and bottom, and they whipsaw in choppy markets. The point is discipline, not prediction.

    How to pick the right one

    Match the lookback to how long you plan to hold. A day or swing trader might use a 20-day average; a long-term investor is better served by the 200-day. The only way to know whether a setting actually helped a given ETF is to test it. Our free backtest calculator does exactly that: paste the ETF’s price history, set the lookback, and see whether the rule beat buy-and-hold.

    Test before you trust

    Do not take any moving average on faith. Replay it on your own data first, and watch how it behaves in both trending and range-bound periods. The backtest calculator will show you the win, the whipsaws, and the drawdowns, so the choice is made on evidence rather than habit. For the broader picture, see our signal comparison guide.

    FAQ

    EMA or SMA for ETFs?

    Both work. The simple moving average (SMA) weights every day equally and is the classic choice for the 200-day trend filter. The exponential moving average (EMA) reacts faster to recent prices. For long-term trend following on ETFs, the 200-day SMA is the standard; for shorter, faster signals, traders often prefer an EMA.

    What moving average settings are best for ETFs?

    Common settings are the 50-day for short-term trend, the 100-day for intermediate, and the 200-day for long-term trend. There is no magic number; longer lookbacks give fewer, slower signals with fewer whipsaws, and shorter lookbacks react faster but trade more.

    What is a moving average crossover strategy?

    A crossover strategy buys when a shorter moving average crosses above a longer one (a golden cross) and sells or moves to cash when it crosses below (a death cross). A common ETF version is the 50-day crossing the 200-day.

    How do I choose a moving average for ETF trading?

    Match the lookback to your holding period. If you trade weekly, a 20- or 50-day average may fit. If you invest for years, the 200-day is the classic trend filter. Test any choice on your own ETF before trusting it.

    Disclaimer: Educational content only, not financial advice. Fund fees and details change; verify them on the issuer’s site before investing. Full disclaimer and affiliate disclosure.

  • ETF Momentum Strategy: A Step-by-Step Approach to Momentum Investing

    An ETF momentum strategy ranks exchange-traded funds by recent performance and holds the strongest, rebalancing on a set schedule. This page is the step-by-step how-to; for the funds themselves, see our momentum ETF list.

    Why momentum when picking ETFs?

    Momentum rests on a simple, well-documented idea: assets that have outperformed recently tend to keep outperforming for a while, and assets that have lagged tend to keep lagging. Applying it to ETFs lets you stay with the trends that are working and step away from the ones that are not, without predicting the market.

    How to choose ETFs using momentum

    The standard recipe has three steps. First, define your universe, such as a list of broad sector or asset-class ETFs you are willing to hold. Second, rank them by total return over a lookback, most often 12 months minus the most recent month (the 12-1 rule) to avoid short-term reversals. Third, hold the top few and drop the rest. Run the ranking on a fixed schedule, usually monthly or quarterly, so the decision stays mechanical.

    How much of your portfolio should you allocate?

    There is no universal answer, but the honest starting point is smaller than most people expect. Because momentum can lag the market for long stretches, many investors cap a momentum sleeve at 10% to 20% of the portfolio and keep the rest in a broad index or trend-following core. Treat momentum as a satellite that you can afford to see underperform for years at a time, not as the foundation.

    Is momentum investing risky?

    Yes. Momentum is prone to sharp reversals: when leadership turns over, momentum positions fall fast and together. It also trades more than a buy-and-hold fund, so costs and taxes compound. And it can underperform for years during regime changes. The risks are real and should be sized for, not ignored.

    Build your own momentum screen

    You can replicate the core idea with a spreadsheet. List your ETFs, pull each one’s return over the last 12 months, and sort descending. Hold the top three to five. You can run this ranking instantly with our free ETF momentum ranker. Do the same exercise next month and trade only when the ranking changes. That is the whole strategy in a repeatable form, and it is the same logic our free backtest calculator replays with your own data.

    FAQ

    Which momentum ETF is the best to invest in?

    The largest and most liquid are MTUM and SPMO, with VFMO as a low-cost option. The best fit depends on your universe (US large cap, broad market, or international) and cost tolerance.

    Are momentum ETFs a good investment?

    Momentum has been one of the most persistent factors in markets, but it is not a guarantee. Momentum ETFs can lag for years, turn over often, and fall sharply in fast reversals, so most investors treat them as a slice rather than a core holding.

    What is a momentum ETF?

    A momentum ETF is a fund that holds assets that have risen the most over a recent window, usually 6 to 12 months, on the theory that winners keep winning.

    What are momentum factor ETFs?

    Momentum factor ETFs are a subset that use a factor-based, rules-driven momentum screen rather than an active manager. MTUM, SPMO, VFMO and QMOM are examples. See the momentum ETF list for details.

    Disclaimer: Educational content only, not financial advice. Fund fees and details change; verify them on the issuer’s site before investing. Full disclaimer and affiliate disclosure.

  • Relative Strength ETFs: How They Work and the Top Funds

    Relative strength ETFs are exchange-traded funds that rank holdings by how strongly they are outperforming their peers or a benchmark, and hold the leaders. They package relative strength analysis into a fund so you do not have to run the ranking yourself.

    What is relative strength?

    Relative strength measures how one asset is performing compared with something else, usually over 3 to 12 months. If an ETF is up 4% while the broader market is up 2%, it has positive relative strength. The key point is that it is a comparison, not an absolute number: an ETF can fall and still have strong relative strength if everything else fell more.

    In practice, analysts rank a universe of ETFs or stocks by their relative strength and buy the strongest, on the theory that leadership persists for a while before it reverses.

    What relative strength is not

    • Not absolute momentum. Momentum is often just an asset’s own return. Relative strength is that return measured against a benchmark or peers.
    • Not fundamental strength. A company can have strong earnings and weak relative strength, or vice versa. Relative strength is purely price-based.

    How relative strength ETFs work

    Most relative strength ETFs use a ranking model built by Dorsey Wright, a Nasdaq company that has specialized in relative strength since the 1980s. The model scores each eligible stock on its relative strength, and the fund holds the top slice. Holdings are rebalanced periodically (PDP rebalances quarterly) so the portfolio keeps rotating into new leaders as old ones fade.

    The main relative strength ETFs

    Fund Ticker Expense ratio Approach
    Relative Strength Managed Volatility Strategy RSMV 0.95% Relative strength plus a volatility overlay
    Invesco Dorsey Wright Momentum PDP 0.62% Ranks roughly 100 US stocks by relative strength

    Expense ratios as of August 2026. Verify current fees before investing. Dorsey Wright also runs DWAS (small cap) and QQQA (Nasdaq-100) on the same relative strength approach.

    Relative strength versus momentum

    The line is blurry, and many funds mix the two. A momentum ETF typically buys assets that have risen the most. A relative strength ETF buys assets that are beating their benchmark. In a rising market the two produce similar lists; in a falling market relative strength can point to assets that are merely falling less. For the step-by-step process of applying either, see our ETF momentum strategy guide.

    Risks to relative strength

    • Reversals. Leadership can turn over suddenly, and a relative strength fund will be caught holding yesterday’s leaders.
    • Concentration. Ranking models tilt toward a few hot sectors, so the fund can be far less diversified than the index.
    • Turnover and cost. Quarterly rebalancing trades more than an index fund, adding costs and tax drag on top of the expense ratio.
    • Chopping. In trendless, range-bound markets the strategy whipsaws and can lag a simple index fund.

    Rank your own watchlist in five minutes

    You do not need a fund to see relative strength in action. Take the ETFs on your watchlist and write down each one’s return over the last 6 and 12 months, then the same for the S&P 500. Rank them by how far above or below the index they sit. The ones above the index have positive relative strength; the ones below have negative. Watch how that ranking shifts month to month. That is the entire concept, and it is why the funds are mechanical rather than clever.

    To test whether a trend or momentum rule actually helped historically, run the numbers through our free backtest calculator.

    FAQ

    What is relative strength?

    Relative strength measures how an asset is performing compared with a benchmark or its peers, usually over 3 to 12 months. A high relative strength reading means the asset is outperforming, not that it has risen in absolute terms.

    What is a relative strength ETF?

    A relative strength ETF is a fund that ranks holdings by relative strength and holds the leaders, rebalancing on a schedule. RSMV and the Dorsey Wright funds (PDP, DWAS, QQQA) are examples.

    Is relative strength the same as momentum?

    They overlap but are not the same. Momentum usually means an asset’s own recent return. Relative strength compares that return against a benchmark or peers, so an asset can have positive momentum but weak relative strength if its peers rose more.

    What is the best relative strength ETF?

    There is no single best. RSMV combines relative strength with a volatility overlay, while PDP ranks roughly 100 US stocks by relative strength. The right choice depends on whether you want the volatility management or a pure ranking.

    Disclaimer: Educational content only, not financial advice. Fund fees and details change; verify them on the issuer’s site before investing. Full disclaimer and affiliate disclosure.

  • MTUM vs SPMO: Which Momentum ETF Belongs in Your Portfolio? (2026 Comparison)

    MTUM (iShares MSCI USA Momentum Factor ETF) and SPMO (Invesco S&P 500 Momentum ETF) are the two largest momentum ETFs available to US retail traders. Both buy stocks with strong recent price gains, but they differ in their index methodology, rebalancing frequency, cost, and historical returns. SPMO has outperformed over the past decade with a lower expense ratio, while MTUM offers broader diversification including mid-cap stocks.

    The short version:

    • SPMO tracks the S&P 500 Momentum Index — 100 large-cap stocks, rebalanced semi-annually. Expense ratio: 0.13%. 10-year annualized return: ~20.3%.
    • MTUM tracks the MSCI USA Momentum SR Variant Index — ~126 large- and mid-cap stocks, rebalanced quarterly. Expense ratio: 0.15%. 10-year annualized return: ~16.5%.
    • SPMO won on performance in 5 of the last 6 calendar years (2021–2026) and carries a lower fee.
    • MTUM wins on diversification with more holdings across a broader market-cap range and quarterly rebalancing that adapts faster to market shifts.
    • Both funds share ~74% overlap in holdings — they’re more similar than different.

    What Are MTUM and SPMO?

    MTUM and SPMO are both momentum factor ETFs — funds that select stocks based on recent price performance rather than market cap weighting. They are rules-based, passive funds that track a momentum index, not active strategies.

    How Do MTUM and SPMO Differ in Methodology?

    What index does MTUM track?

    MTUM tracks the MSCI USA Momentum SR Variant Index. The “SR Variant” means rebalancing changes are spread over three days around the effective date to reduce trading costs. The index selects stocks from the MSCI USA Index (large- and mid-cap US stocks) with the highest momentum scores based on 6-month and 12-month price returns (excluding the most recent month). It holds approximately 126 stocks and rebalances quarterly.

    What index does SPMO track?

    SPMO tracks the S&P 500 Momentum Index. It selects the 100 stocks with the highest momentum scores from the S&P 500 (large-cap only). Momentum is calculated using 12-month price returns, excluding the most recent month. It rebalances semi-annually in March and September.

    MTUM vs SPMO: Side-by-Side Comparison

    FeatureMTUMSPMO
    IssuerBlackRock (iShares)Invesco
    InceptionApril 16, 2013October 9, 2015
    Expense Ratio0.15%0.13%
    AUM~$25.3 billion~$22.2 billion
    Underlying IndexMSCI USA Momentum SR VariantS&P 500 Momentum
    Number of Holdings~126100
    Market Cap UniverseLarge + Mid CapLarge Cap (S&P 500)
    RebalancingQuarterlySemi-annual (Mar/Sep)
    Portfolio Turnover~116%~44%
    Dividend Yield (TTM)~0.54%~0.69%
    Beta (3-5Y)~1.22~1.06

    Sources: iShares.com, Schwab ETF Research, Invesco, as of August 2026.

    Which Has Better Historical Performance?

    SPMO has significantly outperformed MTUM over the past decade. According to PortfoliosLab, SPMO delivered a 10-year annualized return of ~20.3% compared to MTUM’s ~16.5% — a meaningful gap driven by stronger performance in recent years.

    YearMTUM ReturnSPMO ReturnS&P 500
    2021+13.5%+23%+27%
    2022-18.2%-10%-19%
    2023+9.1%+18%+24%
    2024+32.9%+46%+23%
    2025+22.1%+27%+16%
    2026 YTD (Jul)~+20.0%~+27-29%~+13%

    Sources: iShares.com (MTUM), Trefis/PortfoliosLab (SPMO), as of August 2026. YTD figures are approximate NAV total returns.

    SPMO outperformed MTUM in 5 out of the 6 periods shown. The gap was widest in 2024 (SPMO +46% vs MTUM +33%) and 2021 (+23% vs +13.5%). Both funds meaningfully beat the S&P 500 in 2024, 2025, and 2026 YTD.

    Why Has SPMO Outperformed MTUM?

    Three factors explain most of the gap:

    1. More concentrated momentum signal. SPMO holds only the top 100 momentum stocks from the S&P 500. MTUM casts a wider net (126 stocks including mid-caps), which dilutes the momentum factor. The SPMO portfolio has a higher “effective holdings ratio” (0.28 vs MTUM’s lower concentration), meaning it places bigger bets on the highest-momentum names.
    2. Lower turnover. SPMO’s semi-annual rebalancing (44% turnover) means less trading drag. MTUM’s quarterly rebalancing (116% turnover) incurs more transaction costs and can trade in and out of positions more frequently.
    3. Lower fee. SPMO charges 0.13% vs MTUM’s 0.15%. The 2-basis-point difference is small but compounds over time.

    What Are the Holdings and Sector Differences?

    Both funds are heavily weighted toward technology — the sector that has driven most US market momentum in recent years. As of mid-2026, MTUM allocated ~47.6% to tech, while SPMO allocated ~56.8%. Both are significantly overweight tech compared to the broader S&P 500.

    Key sector differences:

    • Energy: MTUM holds ~11.8% vs SPMO’s lower allocation — MTUM’s mid-cap inclusion picks up more energy names.
    • Industrials: MTUM ~14.8% vs SPMO ~12.8%.
    • Consumer Staples: SPMO holds ~4% vs MTUM’s lower allocation, providing a touch more defensive positioning.
    • Communication Services: SPMO ~9% vs MTUM’s lower weight.

    Despite these differences, the two funds share ~74% overlap in holdings (per ETF Trends analysis). The largest common holdings include Nvidia, Apple, Meta, and other mega-cap tech names that have persistently exhibited strong momentum.

    Which Is Better for a Trend Trading System?

    The answer depends on your system’s design:

    If your system prioritizes…ChooseWhy
    Maximum momentum exposureSPMOHigher concentration in top momentum names, stronger historical returns
    Lower feesSPMO0.13% vs 0.15% — small but meaningful at scale
    Broader diversificationMTUM126 holdings including mid-caps, quarterly rebalancing
    Faster adaptation to market regime changesMTUMQuarterly rebalancing can rotate in/out of sectors faster
    Lower portfolio turnover / tax efficiencySPMO44% turnover vs 116% — less trading and fewer taxable events
    Mid-cap exposureMTUMMSCI USA includes mid-caps; S&P 500 is large-cap only

    For a simple trend-following system that buys momentum and holds, SPMO has the stronger track record. For a tactical system that rebalances frequently or pairs momentum with other factors, MTUM’s quarterly resets and broader universe may complement your strategy better.

    Quick Self-Check

    Test your understanding of the MTUM vs SPMO comparison. Click each question to reveal the answer.

    Which fund has a lower expense ratio?

    SPMO charges 0.13%, while MTUM charges 0.15%. SPMO is cheaper by 2 basis points.

    How often does each fund rebalance?

    MTUM rebalances quarterly (4 times per year). SPMO rebalances semi-annually (twice per year, in March and September).

    Which fund includes mid-cap stocks?

    MTUM includes mid-cap stocks because it tracks the MSCI USA Index (large- + mid-cap). SPMO is limited to the S&P 500, which is large-cap only.

    Frequently Asked Questions

    Can I use both MTUM and SPMO in the same portfolio?

    Yes, but there is significant overlap (about 74% of holdings are shared). Combining both adds little diversification benefit. You are better off picking one and allocating the rest of your portfolio to a different factor or asset class.

    Which fund is better for long-term holding?

    SPMO has a stronger long-term track record (10-year annualized ~20.3% vs MTUM’s ~16.5%) and a lower expense ratio. However, momentum as a factor can experience long periods of underperformance — neither fund should be your only holding.

    Do MTUM and SPMO pay dividends?

    Yes, both pay dividends. MTUM pays quarterly dividends with a trailing 12-month yield of approximately 0.54%. SPMO also pays quarterly with a yield of approximately 0.69%. Both are relatively low-yield due to their growth-oriented holdings.

    Which momentum ETF is larger by assets?

    MTUM is the larger fund with approximately $25.3 billion in AUM (as of August 2026), compared to SPMO’s $22.2 billion. MTUM has been on the market since 2013, two years longer than SPMO (2015).

    What happens to these funds during a bear market?

    Momentum funds tend to fall harder in bear markets because they are heavily invested in the stocks that rose the most — which also tend to fall the fastest. In 2022, MTUM fell -18.2% and SPMO fell -10%, compared to the S&P 500’s -19%. SPMO’s semi-annual rebalancing helped it hold up better by not trading in and out of positions during the downturn.

    Educational content only — not financial advice. Past performance does not guarantee future results. Trading involves risk of loss. View our Disclaimer and Affiliate Disclosure.

  • ETF Trend Trading Systems Malaysia: Bursa ETFs and Brokers

    An ETF trend trading system works the same everywhere: follow a written set of rules to stay invested in an uptrend and step aside in a downtrend. What differs by country is where you trade, which ETFs are available, and how the tax rules treat your trades. This page covers the local specifics.

    Where ETFs trade in Malaysia

    Local ETFs trade on Bursa Malaysia. The on-exchange list is small and many funds trade thinly, so for a trend system that needs liquid entries and exits, most Malaysian investors combine local funds with US or global ETFs bought through a licensed broker.

    Bursa ETF providers and examples

    • TradePlus — tracker funds including China and regional exposures.
    • ABF Malaysia Bond Index Fund (ABFMY1) — a bond ETF from AmFunds Management.
    • Kenanga — index and leveraged KLCI products.
    • i-VCAP Management — dividend and Shariah-compliant equity ETFs.

    Brokers and accessing global ETFs

    SC-licensed brokers include Rakuten Trade, moomoo Malaysia, Webull Malaysia, and M+ Global, with Interactive Brokers offering a very large global ETF range. Because the local ETF list is thin, a Malaysian trend trader will usually hold a global ETF or two through these platforms. Check each broker’s foreign-market and currency-conversion fees, since they differ meaningfully between local and international brokers.

    How the trend rules apply here

    The signal and rules do not change with your country. A 200-day moving-average rule on a broad equity ETF, with a bond or cash alternative, behaves the same whether you trade on the SGX, the ASX, or Bursa. The local differences are the fund choices and the cost and tax you pay on each trade.

    FAQ

    How many ETFs are on Bursa Malaysia?

    Bursa Malaysia lists a small ETF universe, roughly 13 to 20 products as of recent years, covering equity, fixed income, commodity, and a few leveraged funds. Many trade thin, so most Malaysian investors also buy foreign ETFs.

    Can Malaysians buy foreign ETFs?

    Yes. Securities Commission (SC) licensed brokers such as Rakuten Trade, moomoo Malaysia, Webull Malaysia, and M+ Global, as well as Interactive Brokers, offer access to US and other global ETFs.

    How are ETF gains taxed in Malaysia?

    Gains on Bursa-listed shares have generally been exempt from capital gains tax for individuals, but Malaysia’s rules have changed in recent years. Confirm the current treatment, including on foreign shares, with a tax adviser.

    To turn any of these into an actual system, start with how to build an ETF trend trading system, then backtest it honestly and document your rules with the rule tester.

    Disclaimer: Educational content only, not financial or tax advice. Markets, brokers, and tax rules change, and details here may be out of date. Confirm everything with a licensed adviser before acting. Full disclaimer and affiliate disclosure.

  • ETF Trend Trading Systems Australia: ASX ETFs and Brokers

    An ETF trend trading system works the same everywhere: follow a written set of rules to stay invested in an uptrend and step aside in a downtrend. What differs by country is where you trade, which ETFs are available, and how the tax rules treat your trades. This page covers the local specifics.

    Where ETFs trade in Australia

    ETFs trade on the Australian Securities Exchange (ASX), and a smaller number on Cboe Australia. With over 360 listed ETFs, Australia has one of the most developed ETF markets outside the US.

    ASX ETF providers and examples

    • Vanguard — broad funds such as the diversified and index ranges, plus single-market trackers.
    • BetaShares — the Australia 200 ETF (A200) and a wide range of sectors and commodities.
    • iShares (BlackRock) — global exposures such as the iShares Global 100 ETF and S&P 500 trackers.
    • VanEck and SPDR — additional index, commodity, and strategy funds.

    Brokers and the tax angle

    Australian investors typically use online brokers such as CommSec, CMC Markets, Stake, or SelfWealth. Because Australia taxes realised gains, the turnover of a trend system matters more here: more trades can mean more taxable events. Holding periods over 12 months may qualify for the 50% capital gains tax discount for individuals, so consider how your rebalance schedule interacts with that. Confirm all tax treatment with a qualified adviser.

    How the trend rules apply here

    The signal and rules do not change with your country. A 200-day moving-average rule on a broad equity ETF, with a bond or cash alternative, behaves the same whether you trade on the SGX, the ASX, or Bursa. The local differences are the fund choices and the cost and tax you pay on each trade.

    FAQ

    How many ETFs are on the ASX?

    There are over 360 ETFs listed on the ASX, plus roughly 30 more on Cboe Australia. The range covers broad equity, fixed income, commodity, and sector funds.

    Who are the main ASX ETF providers?

    Vanguard, BetaShares, iShares (BlackRock), VanEck, and SPDR are the main providers. Each offers broad market and index funds suitable for a trend system.

    Do Australians pay capital gains tax on ETFs?

    Yes. Gains from selling an ETF are generally subject to capital gains tax. Individuals holding an asset for more than 12 months may qualify for a 50% discount on the taxable gain. Confirm your situation with a tax adviser.

    To turn any of these into an actual system, start with how to build an ETF trend trading system, then backtest it honestly and document your rules with the rule tester.

    Disclaimer: Educational content only, not financial or tax advice. Markets, brokers, and tax rules change, and details here may be out of date. Confirm everything with a licensed adviser before acting. Full disclaimer and affiliate disclosure.

  • ETF Trend Trading Systems Singapore: Exchanges, ETFs, and Brokers

    An ETF trend trading system works the same everywhere: follow a written set of rules to stay invested in an uptrend and step aside in a downtrend. What differs by country is where you trade, which ETFs are available, and how the tax rules treat your trades. This page covers the local specifics.

    Where ETFs trade in Singapore

    ETFs trade on the Singapore Exchange (SGX), the same way shares do. The local list is smaller than the US or UK, so Singapore investors commonly combine a few SGX-listed funds with US or Ireland-domiciled ETFs bought through a licensed broker.

    SGX ETF providers and examples

    • SPDR Straits Times Index ETF (ES3) — tracks the STI, Singapore’s 30 largest listed companies.
    • Nikko AM Singapore STI ETF (G3B) — another STI tracker, popular for regular savings plans.
    • ABF Singapore Bond Index Fund — a bond ETF for the defensive side of a trend system.
    • SPDR Gold Shares (O87) — gold exposure, used by some trend portfolios.

    Brokers Singapore investors use

    Licensed options include FSMOne, Phillip Securities (POEMS), moomoo SG, and Interactive Brokers. Robo and wealth platforms such as Endowus and StashAway offer ETF access through SRS. Compare commissions and, if you plan to buy US or LSE-listed ETFs, check foreign-market fees.

    SRS and CPF: the local angle

    Singapore’s SRS gives tax relief on contributions, and CPFIS lets part of your CPF savings invest in eligible ETFs. Both have an approved list of funds, so check eligibility before committing. Because Singapore has no capital gains tax, the buy-and-sell turnover of a trend system carries less local tax drag here than in many other markets.

    How the trend rules apply here

    The signal and rules do not change with your country. A 200-day moving-average rule on a broad equity ETF, with a bond or cash alternative, behaves the same whether you trade on the SGX, the ASX, or Bursa. The local differences are the fund choices and the cost and tax you pay on each trade.

    FAQ

    Can I buy ETFs on the SGX in Singapore?

    Yes. The Singapore Exchange (SGX) lists ETFs from providers such as SPDR, Nikko AM, and Lion Global, including the SPDR Straits Times Index ETF and the Nikko AM STI ETF. Singapore investors can also buy US and global ETFs through licensed brokers.

    Can I use SRS or CPF to buy ETFs?

    Yes. SRS (Supplementary Retirement Scheme) monies and CPF Investment Scheme (CPFIS) savings can be invested in eligible SGX-listed ETFs, within each scheme’s rules. Check the SGX and your bank’s eligible-fund list before investing.

    Does Singapore tax ETF gains?

    Singapore does not impose a capital gains tax on individuals. Dividends can be taxable in some situations, and foreign withholding taxes still apply on US and other overseas ETFs. Confirm your own position with a tax adviser.

    To turn any of these into an actual system, start with how to build an ETF trend trading system, then backtest it honestly and document your rules with the rule tester.

    Disclaimer: Educational content only, not financial or tax advice. Markets, brokers, and tax rules change, and details here may be out of date. Confirm everything with a licensed adviser before acting. Full disclaimer and affiliate disclosure.

  • ETF Trend Trading Risks: What Can Go Wrong and How to Handle It

    The main risks of ETF trend trading are whipsaws in choppy markets, being late to reverse course, and the discipline required to follow rules through losing streaks. Trend trading does not remove risk; it changes which risks you take.

    Whipsaw risk

    In a range-bound market, a trend filter fires and then reverses, producing repeated small losses. A run of several stopped-out trades is normal for trend systems. The danger is not the losses themselves but the temptation to abandon the rules right before a real trend begins.

    Lag risk

    Trend signals are slow by design. A moving-average rule confirms a reversal only after it has started, so you give back part of every move at both the top and the bottom. This is the price of avoiding predictions. The system will miss the exact top and bottom every time.

    Gap risk

    When a fund’s price jumps past your exit level between sessions, you fill at a worse price than the rule intended. ETFs that track foreign markets, or anything trading during a news event, can gap more at the open.

    Regime risk

    Trend systems are built for trending markets. In long sideways periods they bleed small losses while buy and hold drifts sideways or rises. There is no way to know in advance when the next trend arrives, which is why discipline matters more than clever rules.

    Cost and tax drag

    Every signal change is a trade, and every trade has a cost. Spreads, commissions, and realized gains compound over years. Keep turnover modest and, where possible, run the strategy in a tax-advantaged account.

    Behavioral risk

    This is the risk that matters most. A system only works if you follow it. After three losing trades, most people start skipping signals or adding discretion, and that quietly turns a rules-based system back into guessing. Write the rules down and commit to them before you ever place the first trade.

    ETF-specific risk

    ETFs carry the usual fund risks: tracking error against the index, spreads that widen when markets are stressed, and liquidity that can thin in niche or leveraged funds. Prefer broad, liquid ETFs so your exits actually execute near your planned price.

    How to handle these risks

    • Keep position sizes small enough that a losing streak does not force you to quit.
    • Use simple, conventional rules rather than something tuned to history.
    • Test honestly with costs and biases removed, following the backtesting guide.
    • Document the system with the rule tester so every decision is written, not improvised.

    FAQ

    What is the biggest risk of trend trading ETFs?

    Whipsaws in range-bound markets. A trend filter keeps getting triggered and stopped out, producing a run of small losses while the market goes nowhere. This is the normal cost of the strategy, not a sign it is broken.

    Can trend following lose money for a long time?

    Yes. In choppy, sideways markets a trend system can underperform buy and hold for years. It tends to make up ground in strong, sustained moves, but there is no guarantee those come on your schedule.

    Does trend trading work in all markets?

    No. It works best in markets that trend strongly, such as broad equities and commodities, and struggles in range-bound markets where prices keep reversing.

    What is gap risk in ETF trading?

    Gap risk is when a fund’s price jumps past your exit level overnight or over a weekend, so you sell lower than your rule intended. ETFs that trade on foreign markets can gap more at the open.

    How do I reduce the risk of a trend system?

    Use sensible position sizing, keep the rules simple, backtest honestly with costs included, and commit to following the plan through losing streaks. Abandoning a system after a few losses is usually the biggest risk of all.

    Disclaimer: Educational content only, not financial advice. All trading involves risk of loss. Full disclaimer and affiliate disclosure.