Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add a wide range of growing stocks to your portfolio, the SPDR S&P 1500 Momentum Tilt ETF (NYSEMKT:MMTM) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously. It combines holdings from three key indexes (large cap, mid cap, and small cap) that represent about 90% of the market and more heavily weights those stocks that have been exhibiting momentum.
ETFs often sport lower expense ratios than their mutual fund cousins. The SPDR ETF’s expense ratio — its annual fee — is a relatively low 0.35%. The fund is very small, though, so if you’re thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF is too new to have a sufficient track record to assess. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
Why the S&P 1500 and momentum?
The S&P 1500 is a broad-market index, much like the S&P 500 (which is one of its components), but with smaller companies represented, too. That makes it ideal for average investors who’d like quick and inexpensive exposure to the overall market. It adds a bias toward stocks on an upswing, which will appeal to those who expect rising stocks to keep rising — at least for a while.
Kind of by definition, plenty of relatively fast-moving stocks had strong performances over the past year. Gilead Sciences, Inc. (NASDAQ:GILD) soared 121%, partly on optimism for its oral Hepatitis C drug, sofosbuvir, which has cleared four phase 3 trials, as well as for its HIV drugs. Some don’t like how reliant it is on antivirals, and note that its strong revenue growth partly reflects wholesalers stocking up before price hikes, but the company does have a lot of promise.
Visa Inc (NYSE:V) surged 35%, despite being threatened by the growth and potential of mobile and electronic payments. It has been investing in these areas, though, and may follow Mastercard Inc (NYSE:MA)‘s lead in pressuring eBay Inc (NASDAQ:EBAY)‘s PayPal business to share more data with it or face steeper fees. Visa Inc (NYSE:V) is the dominant force in its realm, and is considering buying Visa Europe.