FMTM's Frequently Asked Questions
- 5 days ago
- 17 min read
Overview
This FAQ answers the 27 questions financial advisors most often ask about FMTM, the MarketDesk Focused U.S. Momentum ETF. Topics are organized into six sections — investment strategy, holdings construction, risk management, fees and taxes, trading and liquidity, and portfolio fit — so you can jump directly to the questions most relevant to your due diligence.
FMTM FAQ Sections
FMTM FAQs by Topic
1. FMTM’s Investment Strategy and How It Works
2. Holdings, Construction, and Rebalancing
3. Risk Management and Drawdowns
4. Fees, Tax Treatment, and Distributions
5. Trading, Liquidity, and Operations
6. Portfolio Fit and Allocation
Note from Our Founders
The MarketDesk investment philosophy is grounded in two core beliefs. First, we believe in systematic, rules-based strategies that remove emotion from investment decisions and apply a consistent framework across all types of market environments. Second, we believe that long-term outperformance requires focused portfolios with high active share.
Investing is often a hard and humbling endeavor. We approach markets through a rules-based, probabilistic lens that is grounded in research. Our focus isn’t on being right all the time, but on being consistent over time. There will inevitably be periods when the models are out of sync with prevailing market trends. Sometimes the quantitative algorithm will be early, and at other times it will be wrong. That’s not a flaw but a natural part of any systematic approach that seeks to do something different. By applying a repeatable and disciplined framework, we believe the mathematical advantages embedded in each strategy will work in their favor over a full market cycle.
Thank you for the trust you place in us and the opportunity to steward your capital through a wide range of market environments. If you would like to learn more about the strategies or discuss how they may fit within a broader portfolio, we invite you to reach out to our team.
FMTM – Framework for Smarter Momentum Investing
A quantitative momentum strategy designed to balance offense and defense. The strategy’s data-driven methodology uses price data from the last six months and advanced mathematics to identify companies with the highest relative momentum, even during market drawdowns. FMTM’s repeatable framework aims to provide equal-weight exposure to 30-50 companies with stable and consistent momentum.
Section 1: FMTM’s Investment Strategy and How It Works
Q1. How does the FMTM ETF Pick Stocks?
FMTM is the MarketDesk Focused U.S. Momentum ETF, a quantitative strategy that seeks to provide focused exposure to U.S. companies exhibiting the most consistent upward price trends. Each month, the strategy ranks the investable universe on a momentum signal that emphasizes the quality and stability of a stock's recent price trend, then builds an equal-weighted portfolio of 30 to 50 names with the strongest momentum scores. Each month the strategy systematically rotates into names with strengthening momentum and out of names showing early signs of deterioration to capture profits and limit further losses.
FMTM is built on decades of academic research documenting momentum as one of the more durable drivers of long-term equity returns. The strategy's premise: the data embedded in every stock's share price efficiently aggregates all available information about a company across millions of daily trades into a single forward-looking datapoint that is continuously updated as new information becomes available.
Q2. Is momentum factor investing just performance chasing?
It’s a fair question, and the short answer is no, but the distinction matters. Performance chasing is what individual investors do when they buy whatever part of the market happens to have done well recently, then sell when it trades lower or disappoints. It’s emotional, unsystematic, and tends to produce the wrong entry and exit points.
A momentum factor strategy works differently. It applies a consistent, rules-based framework to identify which areas of the market are leading, then reallocates systematically as leadership changes. The discipline is what separates it from performance chasing. An investor chasing returns will typically buy after a long run and sell after a sharp drop. A rules-based momentum strategy is built to do neither. It adds names showing stable, persistent strength and removes them when the signal weakens, independent of how an investor feels about the position. FMTM uses a data-driven framework to make buying and selling decisions, not human emotion.
Q3. Is FMTM passive or actively managed?
FMTM is actively managed. The strategy’s data-driven methodology uses price data from the last six months and advanced mathematics to identify companies with the highest relative momentum, even during market drawdowns. The strategy is rules-based and quantitative, but it doesn't track a published third-party index. That distinction matters in practice. Active management allows the strategy to rebalance monthly and apply a six-month lookback window, with an investment team behind it monitoring the strategy to ensure it’s doing what it's designed to do.
Q4. What is the FMTM investment universe?
FMTM's investable universe includes U.S. large- and mid-cap companies, broader than the S&P 500 alone. The wider scope is intentional. Momentum trends can emerge in mid-caps before those companies grow into large-caps, and a strategy limited to the S&P 500 can't access those earlier-stage opportunities.
Liquidity is also a defining feature of the universe. To ensure FMTM’s investment strategy can scale as the fund’s assets under management (AUM) grow, FMTM requires each portfolio holding to trade a minimum of $25 million in average daily volume. Across 30 holdings, that floor translates to $750 million in aggregate daily liquidity underlying the portfolio (i.e., 30 x $25 million). The requirement is designed to ensure the strategy can scale as assets grow without sacrificing the ability to move in and out of positions efficiently. For comparison context, many index providers require their underlying holdings to meet a minimum average daily trading volume, which frequently hovers around the ~$500k (roughly 50x lower than FMTM’s $25 million liquidity requirement).
Q5. What is FMTM's lookback window, and why 6 months instead of 12 months?
FMTM evaluates momentum over a six-month lookback window. Most traditional momentum strategies use a 12-month lookback. The trade-off is responsiveness: a 12-month window can smooth short-term noise, but it can also lag real-time market leadership changes by a wide margin. A 6-month window weighs recent price behavior more heavily, allowing the portfolio to rotate sooner when market leadership shifts. The shorter lookback window is one of the structural reasons FMTM’s portfolio and performance can look meaningfully different from 12-month momentum strategies throughout a full year.
Q6. What does "trend consistency and quality" mean in plain English?
FMTM's signal is built on the principle that price data is the most efficient available aggregator of investor sentiment, fundamentals, and forward-looking expectations. Most momentum strategies rank stocks by total return over a twelve-month window. The higher the return, the higher the rank. FMTM goes a step further by evaluating how that return was earned, not just how large it was.
Consider two stocks that both gained +30% over six months. The first climbed steadily, posting gains throughout most of the period. The second was flat for five months, then traded up sharply in a single week. Both have the same return. They don't have the same trend. FMTM's signal scores the first stock more favorably because a steady, persistent trend is more likely to continue than a single sharp move that may already have run its course. Filtering for trend quality is designed to reduce exposure to short-term spikes that could reverse quickly.
Q7. What is FMTM's sell discipline?
Exit discipline (deciding when to remove a holding from a portfolio) is as important to a momentum strategy as entry selection. FMTM applies the same systematic framework on the way out as on the way in. When a holding's momentum signal weakens below the threshold required to remain in the portfolio, the position is removed at the next monthly rebalance, regardless of how the underlying company is performing on other dimensions. The model is designed to cut losers before they become significant detractors, rather than wait for confirmation that a downtrend has fully developed. That same discipline works in both directions. The strategy systematically rotates into names with strengthening momentum and out of names showing early signs of deterioration. The discipline of the dual signal is intended to compound over time.
Q8. Is FMTM's recent outperformance just a hot streak, or is there a structural reason to expect it to continue?
It's the right question to ask about any fund with a strong early track record. The honest answer is that no investment strategy is immune to periods of underperformance, including FMTM. Past results don't guarantee future results. What investors can evaluate is whether the structural design of the strategy is doing something different from peer momentum funds, because that's what would justify expecting different results over time.
FMTM's structure differs from traditional momentum ETFs across four reinforcing features. (1) The 6-month lookback weights recent price behavior more heavily than the 12-month industry standard, which means the model registers leadership changes sooner. (2) The monthly rebalance lets the portfolio act on those signal changes within weeks rather than waiting for a semi-annual reconstitution that can leave a peer fund holding stale leadership for months at a time. (3) Equal weighting keeps factor exposure is cleaner because portfolio results aren't dominated by whichever mega-cap stock happens to be the largest in the index that quarter. (4) The broader large- and mid-cap universe gives the strategy access to emerging trends that large-cap momentum funds structurally can’t capture.
Whether those four features will continue to produce differentiated results is not something the fund or anyone else can guarantee. What can be said is that the differences are real, structural, and visible in the portfolio. Investors should evaluate whether they believe those structural features are durable sources of differentiation.
Section 2: Holdings, Construction, and Rebalancing
Q9. How many stocks does FMTM hold?
FMTM typically holds 30 to 50 stocks. The portfolio is concentrated by design, so each position has a meaningful impact on portfolio results. Many broader momentum funds hold 100 or more companies, which can dilute the factor exposure and construct a portfolio that looks and performs only slightly different than a broad-market index. FMTM's focused portfolio is built to deliver purer and more concentrated exposure to the momentum signal.
Q10. How is the portfolio weighted? Why Does FMTM use Equal-Weighting?
FMTM uses equal weighting. Every position receives roughly the same allocation at each monthly rebalance, regardless of the underlying company's market capitalization.
FMTM's equal-weight methodology is designed to achieve two primary objectives. First, it reduces company-specific risk. In a concentrated portfolio of 30 to 50 stocks, a single oversized position can have an outsized effect on performance. Equal weighting prevents that by spreading capital evenly across holdings.
Second, it keeps the portfolio aligned with the momentum signal. A market-cap-weighted approach would tilt the portfolio toward larger companies regardless of their momentum characteristics, and over time a few mega-cap names would come to dominate returns. Equal weighting ensures each stock is in the portfolio because of the strength of its momentum score, not its size. The result is a portfolio with less overlap to broad-market indexes and more direct exposure to the intended momentum signal.
Q11. How often does FMTM rebalance?
FMTM rebalances monthly. The monthly cadence is one of the strategy's most important structural features. Most index-based momentum ETFs rebalance only twice per year. In fast-moving markets, leadership can shift well before the next scheduled rebalance, potentially leaving those funds holding names that have already lost momentum. A monthly cadence keeps the portfolio responsive to current market conditions, allowing the strategy to rotate away from weakening trends sooner and into emerging strength faster.
Q12. How is FMTM different from other momentum ETFs?
FMTM differs from larger momentum ETFs across four dimensions: signal definition, lookback window, rebalance frequency, and portfolio construction. (1) Signal: FMTM evaluates the consistency and quality of a stock's recent trend, not just how much it has gained. Most momentum funds rank stocks on raw twelve-month total return. (2) Lookback: FMTM uses a shorter six-month window, which is designed to capture more current trends. The traditional academic standard, used by legacy momentum funds is twelve months excluding the most recent month. (3) Rebalance: FMTM rebalances monthly. Most index-based momentum ETFs rebalance only twice per year. (4) Construction: FMTM holds 30 to 50 equal-weight positions across U.S. large- and mid-caps. Most peers hold 100 or more positions, often weighted by a blend of market cap and momentum score, and many are limited to large-cap-only universes.
For a deeper side-by-side comparison, the FMTM vs. SPY, FMTM vs. SPMO, FMTM vs. MTUM, FMTM vs. XMMO, FMTM vs. JMOM, FMTM vs. FDMO, and FMTM vs. VFMO blog posts walk through each comparison in detail.
Q13. How much portfolio overlap is there with other momentum ETFs?
Less than most investors expect. Most legacy momentum ETFs draw exclusively from the S&P 500 and weight by a blend of market capitalization and momentum score, which means their largest positions tend to cluster in the same mega-cap names regardless of which fund you pick. FMTM works differently on three dimensions that all reduce overlap: (1) a broader investable universe that includes mid-caps; (2) equal weighting that prevents mega-cap dominance; and (3) a 6-month lookback with a monthly rebalance that can respond to leadership changes faster than a 12-month signal rebalanced semi-annually. The practical result is that FMTM's holdings often differ meaningfully from large-cap-only momentum ETFs at any given point in time. The low overlap is also why FMTM can sit alongside another momentum ETF in a portfolio without being redundant.
Section 3: Risk Management and Drawdowns
Q14. Why does portfolio drawdown matter as much as total return?
Many investors focus primarily on returns, but drawdown, how much a portfolio declines before recovering, can be just as important. The deeper the decline, the harder it is to get back to even: a −15% loss requires a +17.6% gain to recover, while a −50% loss requires a +100% gain. Smaller drawdowns reduce recovery time and make it easier for investors to stay disciplined during periods of volatility. For a momentum strategy specifically, controlling downside matters because the next leadership cycle often begins before the broader market has fully recovered. A portfolio that is closer to its prior high is likely better positioned to participate in that next leg.
Q15. How is FMTM designed to respond during periods of market stress?
FMTM's framework is designed to respond to changing market conditions in two ways. First, the 6-month lookback weights recent price behavior more heavily than a 12-month window, which means deteriorating trends register in the model sooner. Second, the monthly rebalance allows the portfolio to act on those signal changes within weeks rather than waiting for the next semi-annual reconstitution. During periods of elevated market stress, the framework is designed to go further by emphasizing shorter-term price data, which makes the momentum signal even more responsive to recent leadership changes. As trends shift and previous leaders come under pressure, the strategy is designed to rotate toward areas of emerging relative strength rather than remain anchored to stale momentum signals.
Q16. What environments are typically harder for momentum strategies?
Momentum strategies generally face their biggest challenges in three environments. The first is sharp, fast reversals or whipsaw markets where leadership flips abruptly and a strategy positioned in recent winners is left holding the wrong names just as the new leaders emerge. The second is range-bound or trendless markets where there is no clear leadership for a momentum framework to identify. The third is narrow rallies dominated by a small handful of mega-cap stocks, where an equal-weighted strategy will lag because it does not concentrate in those names. Every momentum implementation, including FMTM, has periods of relative underperformance. These periods are a normal part of factor-based investing, not a sign the framework is broken.
What separates one momentum strategy from another is how quickly it adapts when conditions change. FMTM's monthly rebalance, 6-month lookback, and risk-driven signal adjustment are designed to do exactly to respond faster, rotate sooner, and spend less time positioned in yesterday's leadership.
Q17. Does FMTM hedge or move to cash during periods of market stress?
No. FMTM remains fully invested in equities at all times. The strategy does not move to cash, use derivatives, or apply any hedging overlay. Risk management is implemented through holding selection rather than asset allocation shifts. During periods of elevated stress, the framework emphasizes shorter-term price data to identify which equities are demonstrating relative strength under current conditions. For example, during a market selloff, leadership often shifts toward lower-beta stocks and more defensive sectors, which is the type of relative strength the model is designed to identify and rotate toward. The portfolio still consists of 30 to 50 equal-weighted U.S. large- and mid-cap stocks, but it rotates among those names more responsively when leadership is changing quickly. As a result, it would be reasonable to expect the portfolio’s holdings and sector exposures to look materially different during a bear market than during a bull market.
Section 4: Fees, Tax Treatment, and Distributions
Q18. What is FMTM's expense ratio?
FMTM's expense ratio is 0.45%. The fee covers active quantitative management, monthly rebalancing, and the operational costs of running an actively managed ETF. The expense ratio is higher than passive index momentum ETFs and below many specialty active ETFs. Whether that tradeoff makes sense depends on the role momentum plays in the investor's portfolio. If minimizing costs is the priority, a passive index ETF is the right choice. If the goal is a differentiated approach with a faster rebalance, a different momentum signal, and a broader universe, that's what FMTM is designed to provide.
Q19. Does monthly rebalancing make FMTM tax-inefficient? Has FMTM made any capital gains distributions?
Although FMTM actively rebalances its portfolio, ETFs have a structural feature that helps minimize capital gains distributions: the in-kind creation and redemption process. This mechanism is available to all U.S. ETFs and allows the portfolio to manage turnover without realizing capital gains at the fund level. As a result, even strategies with high turnover can remain tax-efficient within the ETF wrapper. To date, FMTM has only distributed dividends and has not made any capital gains distributions. No ETF can guarantee that capital gains will never occur, but the ETF structure is specifically designed to reduce the likelihood that capital gains will ever be paid out.
A common follow-up question is how this compares to buying and holding a passive index ETF like SPY. Any actively rebalanced strategy will generate more portfolio activity than a true buy-and-hold position. What the ETF structure does is separate the internal activity from the tax bill the shareholder receives. When FMTM rotates a name out of the portfolio, the in-kind redemption process allows the appreciated security to leave the fund without the fund itself realizing a capital gain. SPY relies on the same mechanism to maintain its tax efficiency despite its own turnover from index reconstitutions. The difference is that FMTM uses it more frequently, and there is no limit on how often it can be used.
Q20. Does FMTM pay a dividend?
FMTM holds U.S. equities, some of which pay dividends. Distributions from FMTM, if any, generally reflect the dividend income received from the underlying holdings. Because the portfolio rotates monthly, the underlying dividend yield can vary from period to period.
Section 5: Trading, Liquidity, and Operations
Q21. Where does FMTM trade and how do I buy it?
FMTM trades on Nasdaq under the ticker FMTM. It can be purchased like any other ETF through a standard brokerage account and is available on most major brokerage platforms. Investors who don't see it listed should check with their brokerage.
Q22. FMTM is smaller than other momentum ETFs. Does that mean wider bid-ask spreads?
Not necessarily. ETF liquidity is driven primarily by the liquidity of the underlying holdings, not the size of the fund itself. FMTM requires each portfolio holding to trade at least $25 million in average daily volume, meaning the underlying securities are highly liquid even when the ETF's secondary market volume is light. Authorized participants can create and redeem FMTM shares against the underlying basket, which keeps the ETF's price tightly linked to its net asset value.
Q23. If FMTM’s AUM continues to grow, will it impair the strategy’s performance?
Growth in AUM is generally not expected to impair the implementation of the strategy. The investable universe already includes a unique requirement that every portfolio holding must trade more than $25 million in average daily volume over the trailing three months, and most current holdings trade well above that threshold. At the strategy's minimum liquidity requirement, 30 holdings at $25 million each implies $750 million in total daily trading volume across the portfolio. In practice, the liquidity is much higher. As of April 30, 2026, the average daily trading volume per holding is +$560 million1, which gives the strategy substantially more capacity than the $25 million floor alone would suggest. The strategy's emphasis on trading volume is intentional and is designed to ensure that holdings remain highly liquid even as the fund grows.
Two additional structural features support capacity. The strategy can increase trading frequency as needed, and the prospectus permits the portfolio to expand from 30 holdings up to 50 positions, all maintained at equal weight. The 50-position ceiling and equal-weight methodology exist specifically to ensure FMTM retains its differentiated factor exposure rather than drifting toward large-cap beta as assets grow. Like all investment strategies, there are practical limits to capacity over time, and these are continuously monitored as part of the portfolio management process.
Q24. Some investors describe an ETF with 30-50 holdings as inherently risky. Is that fair?
It's worth discussing two distinct points. A 30 to 50 stock portfolio is more concentrated than a broad-market fund holding 500 names, and each position can have a bigger impact in a focused portfolio. This is a deliberate design choice for FMTM, not an oversight. A momentum strategy that holds 100 stocks can dilute its factor exposure to the point where it behaves more like the broad market than like a momentum portfolio, which we believe defeats the purpose of owning a momentum sleeve at all. The combination of concentration and active rebalancing mean that FMTM should be expected to behave differently than a broad-market index fund. The tracking difference is the point; it's the source of the differentiated exposure and return profile the strategy is designed to deliver.
Section 6: Portfolio Fit and Allocation
Q25. How does FMTM fit alongside an S&P 500 or total-market core?
FMTM is not designed to replace a broad-market core holding. It is designed to complement one. Because FMTM holds 30 to 50 equal-weighted positions drawn from a universe broader than the S&P 500, its portfolio only partially overlaps with the broader market at any given time. FMTM’s equal-weighting methodology means even shared names are sized very differently. The two can work together: a broad-market core provides diversified market exposure and serves as the strategic anchor of the portfolio, while a momentum sleeve adds factor exposure intended to behave differently than the core during periods of leadership change.
Q26. Should FMTM be held in a taxable or tax-advantaged account?
FMTM can be held in either. The ETF structure's in-kind creation and redemption process is designed to minimize capital gain distributions despite the strategy's monthly turnover, and FMTM has not made any capital gains distributions to date. As a result, the strategy does not carry the same tax-location concerns that a high-turnover mutual fund equivalent would. This information is for general educational purposes only and should not be considered tax advice. Investors should consult their tax advisor regarding their specific situation.
Q27. What sizing typically makes sense for a momentum sleeve?
There is no universally correct allocation, and the right size for any momentum sleeve depends on the investor's overall portfolio structure, risk tolerance, and time horizon. As a general framework, factor-based equity sleeves are commonly sized between 5% and 25% of the equity allocation. A smaller sleeve provides modest factor exposure with limited tracking error against the broad market. A larger sleeve provides stronger factor exposure but with more visible periods of divergence from the core. This is not investment advice. Investors should consult a qualified advisor before making allocation decisions.
Definitions
Bid-Ask Spread: The bid-ask spread is the difference between the highest price a buyer is willing to pay for an asset (the bid) and the lowest price a seller is willing to accept (the ask or offer). It represents the fundamental cost of trading and serves as a key indicator of an asset's market liquidity.
Beta: Beta is a statistical measure of an asset’s volatility in relation to the overall market. It indicates how much a specific security’s price is expected to move relative to market shifts
Footnotes
1. Source: MarketDesk Indices. Average daily trading volume is calculated based on the underlying holdings of FMTM as of 4/30/2026. The calculation multiples the average daily price by the average daily trading volume over the period from 1/31/2026 through 4/30/2026. Trading volume figures are based on publicly available market data and are subject to change. Past liquidity characteristics are not indicative of future market liquidity. Holdings are subject to change and should not be considered investment advice.
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