Is SPMO Still Worth It? The Truth About The Reconstitution

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The video discusses the S&P 500 Momentum ETF (SPMO) and its recent reconstitution. SPMO rebalances its holdings every March and September, based on 12-month price momentum adjusted for volatility, excluding the most recent month's data. This process led to the removal of NVIDIA and the inclusion of other stocks. The fund's methodology prioritizes momentum over sector or earnings, which has historically driven its outperformance. The video highlights that while NVIDIA was a strong performer, its rank dropped according to the fund's rules, leading to its removal. Apple, conversely, had sustained positive momentum and was added. The current tech weighting in SPMO is around 52%. The fund has shown strong year-to-date returns of +26% and +140% over the past five years, with an expense ratio of 0.13%. A key risk identified is the potential for leadership reversals to occur without warning, as the fund's rebalancing has a seven-week lag between data cutoff and trades taking effect. For investors in taxable accounts, high portfolio turnover can lead to capital gains distributions. The speaker suggests that for current investors, holding through churn is advisable if the momentum signal remains durable, otherwise, the process may not be worth continuing if the signal fades.

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