Neglect SPY. Its Momentum Cousin Is Crushing the Index With 26% Returns This Yr, for Solely 0.13%

Fast Learn

• SPMO has surged 26% 12 months so far versus SPY’s 10%, and over 10 years it has greater than doubled SPY’s 247% complete return.

• SPMO’s 100-stock focus and semi-annual rebalancing may cause sharp lag throughout management shifts and create increased capital beneficial properties distributions in taxable accounts.

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The SPDR S&P 500 ETF Belief (NYSEARCA:SPY) is the default fairness holding for tens of tens of millions of buyers, and for defensible causes: it tracks the S&P 500 at an expense ratio of 0.0945%, gives deep liquidity, and closed at $749.17 on July 13, 2026. But SPY holders have quietly missed the market this 12 months. An in depth cousin, nonetheless constructed from the identical 500 shares, is up greater than two and a half occasions as a lot year-to-date. The choice sits throughout the S&P household, prices about 4 foundation factors extra, and rotates on a rules-based schedule that the majority SPY house owners have by no means examined.

That fund is the Invesco S&P 500 Momentum ETF (NYSEARCA:SPMO), and the hole between the 2 in 2026 is the explanation to look carefully.

Why SPY Nonetheless Deserves Its Seat

The fund works as a result of it’s boring in one of the best ways. It owns the whole large-cap U.S. market weighted by dimension, so NVIDIA accounts for 7.58% of the fund, Apple for six.66%, and Microsoft for 4.91%. Over ten years, the ETF has returned 247.11%, and over one 12 months it’s up 20.13%. Anybody constructing a portfolio round a single fairness ticker has executed high-quality.

The shortfall is structural. As a result of SPY is weighted by market cap, it all the time owns yesterday’s winners at yesterday’s costs. When management shifts throughout the index, SPY captures the transfer solely as these names enhance their share. It can’t lean into what’s working now.

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The place SPMO Wins in 2026

The momentum fund tracks the S&P 500 Momentum Index, which selects roughly the highest 100 S&P 500 names, ranked by risk-adjusted worth momentum, and rebalances semiannually. It’s the identical universe of shares because the core S&P 500 fund, filtered to incorporate these with the strongest current development. The expense ratio is 0.13%, which works out to about $13 per $10,000 invested, versus roughly $9.45 for the flagship fund.

These further 4 foundation factors have purchased quite a bit this 12 months. SPMO is up 26.03% year-to-date by means of July 13, 2026, in contrast with SPY’s 9.86%. On a $50,000 place, that’s roughly $13,015 of return for SPMO versus $4,930 for SPY, earlier than the payment distinction of about $18. The payment hole is a rounding error subsequent to the efficiency unfold.

The sting has persevered properly earlier than 2026. Over one 12 months, SPMO is up 34.6%; over 5 years, 162.12%; and over ten years, 554.08%. Throughout the identical ten-year window, SPY returned 247.11%. The momentum tilt has compounded meaningfully by means of a number of regimes, together with the 2022 drawdown and the 2025 rotation.

The Commerce-Offs SPY Holders Ought to Weigh

Momentum wins till it doesn’t. The technique reshuffles at set intervals, so when management breaks sharply, SPMO can lag SPY by means of the flip till the subsequent rebalance repositions the fund. That has already proven up within the brief time period: SPMO is down 2.12% over the previous week, whereas SPY is down 0.28%. Focus can be increased. SPMO holds roughly 100 names somewhat than 500, which suggests sector bets get giant by design.

Turnover issues for taxable accounts. SPMO’s semi-annual reconstitution generates extra inside buying and selling than SPY’s near-static index, which may produce bigger capital beneficial properties distributions in some years. For buyers who need a broader learn on trend-driven methods, our staff’s Breakout Purchaser’s Rulebook lays out the self-discipline behind shopping for shares at new highs somewhat than reaching for laggards.

Easy methods to Think about the Swap

Inside a tax-advantaged account, shifting half or all of an SPY place to SPMO is mechanically easy, and the historic return unfold makes the case by itself. Inside a taxable account, unrealized beneficial properties complicate the choice: promoting SPY at $749.17 after a decade of appreciation can create a tax invoice that erases the fund’s benefit for years. A partial rotation, or directing new contributions to SPMO whereas leaving outdated SPY tons alone, avoids that entice.

What This Says Concerning the Alternative in Entrance of You

The flagship S&P 500 fund stays a legit core holding, and its 0.0945% payment remains to be among the many lowest wherever. The momentum model is the iteration of the S&P 500 that leans into what’s already working, and in 2026, that lean has produced 26.03% in opposition to the core fund’s 9.86%. Whether or not that edge continues depends upon whether or not present management holds by means of the subsequent rebalance. For buyers weighing publicity to that dynamic with out leaving the S&P 500 framework, the momentum fund is usually held as a sleeve alongside the core fund, with allocations revisited when management shifts.

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