FMTM vs. S&P 500: Does a Momentum Strategy Belong in Your Portfolio?
- Mar 23
- 12 min read
Updated: May 23
FMTM and SPY represent two fundamentally different approaches to U.S. equity investing: active momentum versus passive broad-market exposure. This guide compares how each fund works, examines their track records, and discusses how each approach may fit in your portfolio. All data as of 4/30/2026. All performance data is based on the net asset value (NAV) unless otherwise noted.
Executive Summary
Same Goal, Different Implementation: FMTM and SPY take fundamentally different approaches to U.S. equity investing. FMTM employs an active, equal-weighted momentum strategy across large- and mid-caps with monthly rebalancing, while SPY passively tracks the entire S&P 500 on a market-cap-weighted basis.
How Momentum Is Defined: The two funds use fundamentally different selection criteria. FMTM actively selects 30 to 50 stocks based on 6-month trend consistency, whereas SPY passively holds all S&P 500 constituents regardless of momentum or trend direction. This distinction shapes portfolio concentration, sector exposure, and how each fund responds to changing market conditions.
Different Performance Results: Since FMTM's March 19, 2025 inception, methodology differences have resulted in substantial performance divergence. FMTM has returned +57.9% with a −12.1% maximum drawdown, compared to SPY's +26.8% return and −13.7% drawdown, a material gap that illustrates how an active momentum approach can differ from broad-market exposure.
Risk Management Varies: FMTM's monthly rebalancing and concentrated positioning allow it to rotate toward relative strength during market shifts, while SPY holds all S&P 500 constituents at all times regardless of trend direction. The structural difference between active selection and passive ownership directly influences how each fund responds to changing markets.
Portfolio Role Depends on Investor Preference: FMTM may suit investors seeking a higher-conviction, actively managed momentum sleeve with a tighter risk management strategy, while SPY may appeal to those prioritizing the lowest cost and broad passive market exposure. The right choice depends on whether an investor views momentum as a complement to core holdings, an alternative to broad-market indexing, or both.
Historical Performance and Portfolio Drawdown
The table below summarizes performance and maximum drawdown across momentum ETFs since FMTM’s inception date on March 19, 2025. Implementation differences have produced a wide range of outcomes. FMTM’s quantitative strategy has delivered a +57.9% return compared to VFMO (+43.6%), SPMO (+41.5%), MTUM (+39.1%), XMMO (+37.4%), FDMO (+36.4%), and JMOM (+32.7%), while the S&P 500 (SPY) returned +26.8%.
Downside experience also varied across approaches. FMTM experienced a maximum drawdown of −12.1%, compared to drawdowns of S&P 500 (−13.7%), SPMO (−15.2%), MTUM (-14.3%), XMMO (−13.9%), JMOM (-13.7%), FDMO (14.8%), and VFMO (−16.2%).
Equally important as the portfolio's max drawdown is how long it takes the fund to recover and reach a new high. FMTM's maximum drawdown lasted just 33 days from peak to trough to full recovery. By comparison, the S&P 500 (SPY) spent 55 days underwater at its worst. Every day a portfolio spends below its prior high is a day an investor is watching losses rather than capturing gains. A fund that falls less and recovers faster protects capital during volatile markets. Across a full market cycle, the difference can lead to meaningfully different total returns.
Despite sharing a common investment focus on U.S. stocks, differences in portfolio construction, signal definition, and rebalance methodology have translated into materially different return and drawdown outcomes. The data reinforces an important concept: how momentum is implemented can meaningfully impacts both upside capture and drawdown risk.
Momentum ETF | Since FMTM Inception | Max Drawdown % | Max Drawdown Length | Return vs. S&P 500 |
FMTM | 57.9% | -12.1% | 33 days | +31.2% |
VFMO | 43.6% | -16.2% | 40 days | +16.8% |
SPMO | 41.5% | -15.2% | 117 days | +14.8% |
MTUM | 39.1% | -14.3% | 49 days | +12.4% |
XMMO | 37.4% | -13.9% | 27 days | +10.6% |
FDMO | 36.4% | -14.8% | 56 days | +9.6% |
JMOM | 32.7% | -13.7% | 31 days | +6.0% |
S&P 500 (SPY ETF) | 26.8% | -13.7% | 55 days | +0.0% |
Data represents the period since FMTM’s inception date on 3/19/2025 through 4/30/2026. Sources: MarketDesk Indices, Morningstar.com. Max drawdown percentage and max drawdown length based on closing day ETF net asset values (NAVs). The above performance data is based net asset value (NAV). The performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For current standardized performance of FMTM, please call +1.215.882.9983 or visit the Fund's website at https://www.marketdeskindices.com/fmtm.
To view risks, standardized performance and expenses, and for a copy of the prospectus, click the corresponding tickers: VFMO | XMMO | FDMO | SPMO | MTUM | JMOM | SPY
Market price returns are based upon the closing composite market price and do not represent the returns you would receive if you traded shares at other times. NAV Return represents the closing price of underlying securities.
The funds included in the comparison table were selected based on four criteria: (1) a momentum-based investment objective, defined as explicitly targeting the momentum factor as the primary strategy as stated in each fund's prospectus; (2) primary investment in U.S.-listed equity securities; (3) a continuous trading history covering the full comparison period; and (4) availability of publicly verifiable performance data. While we believe this comparison table represents the vast majority of the invested assets in U.S. momentum ETFs, this peer group is not exhaustive, and investors are encouraged to conduct their own research when evaluating the full universe of available products.
How Each Fund Is Built
MTUM – Passive Broad Market Index
SPY tracks the S&P 500 Index, which holds all constituents of the S&P 500 (the benchmark for U.S. large-cap equities). Holdings are weighted by market capitalization, with no selection based on momentum, trend, or any other factor signal.
The approach is simple, transparent, and extremely low cost. SPY’s holdings mirror the S&P 500, and the index reconstitutes quarterly based on market-cap, liquidity, and profitability criteria — not performance signals. Every stock in SPY is a U.S. large-cap company, and the fund’s market-cap weighting means its largest positions are the largest companies in the market.
FMTM – Quantitative Momentum Built Around Trend Quality
FMTM takes a different approach to momentum investing. Rather than ranking stocks by trailing 12-month returns, the strategy seeks to identify companies exhibiting the most consistent, high-quality upward price trends today. The model uses a 6-month lookback window instead of the traditional 12-month lookback that most momentum ETFs use and evaluates not only total return but the consistency of price movement. Stocks that have advanced steadily over time score more favorably than those with sharp spikes followed by uneven or sideways movement.
The investable universe extends beyond the S&P 500 to include large- and mid-cap companies, giving it access to mid-cap momentum trends that SPY's large-cap-only universe does not include. The portfolio typically holds 30 to 50 equal-weight positions updated monthly. Stocks with strong, stable momentum are retained, while those showing weakening trends are removed to capture profits and limit further losses. The monthly rebalance allows the strategy to adapt in real time as market conditions shift.
Side-by-Side Comparison of Key Characteristics
FMTM and the S&P 500 (SPY) represent fundamentally different investment philosophies. FMTM, launched in March 2025, is an actively managed quantitative momentum ETF with a 0.45% expense ratio and assets of approximately $116 million. SPY, launched in January 1993, is a passive broad-market index ETF with a 0.09% expense ratio and manages roughly $670 billion in assets.
Portfolio construction differs significantly. FMTM holds 30–50 U.S. large- and mid-cap stocks equal-weighted and rebalanced monthly. In contrast, SPY owns all companies in the S&P 500, weighted by market capitalization, with no momentum or factor-based selection criteria.
The underlying momentum signals are distinct. FMTM emphasizes consistency and quality of price trends over a six-month lookback to actively select its holdings, while SPY applies no momentum signal and passively holds the entire S&P 500. Since FMTM's inception, these structural
differences have produced distinct outcomes: FMTM returned +48.8% with a −9.2% maximum drawdown compared to the S&P 500’s (SPY) +21.0% return and −13.7% drawdown. The comparison illustrates how active momentum management can produce materially different results from
passive broad-market ownership.
Fund Characteristic | FMTM — MarketDesk | SPY — State Street |
Strategy Type | Active / Quantitative | Passive index |
Expense Ratio | 0.45% | 0.09% |
Inception Date | March 2025 | January 1993 |
Asset Under Management | ~$116M | ~$670B |
# of Holdings | 30–50 | ~500 |
Weighting Style | Equal-weight | Market-cap weighted |
Rebalance Frequency | Monthly | Quarterly |
Universe | U.S. Large and Mid Caps | U.S. Large Caps |
Lookback Period | 6 months | None (passive broad-market index) |
Momentum Signal | Consistency + quality of price trend | None (holds all S&P 500 companies) |
Return Since FMTM Inception | +57.9% | +26.8% |
Return vs S&P 500 (SPY) | +31.2% | 0.0% |
Max Drawdown % | −12.1% | −13.7% |
Max Drawdown Length | 33 days | 55 days |
Data as of 4/30/2026. Sources: MarketDesk Indices, Morningstar.com. For illustrative purposes only.
Comparing SPY vs FMTM’s Risk Management
The two ETFs manage risk very differently. FMTM's quantitative framework places greater emphasis on recent price data, allowing it to respond more quickly as market leadership shifts. By shortening its effective lookback during periods of stress and rebalancing monthly, the portfolio can rotate away from deteriorating trends toward areas demonstrating relative strength. This process is designed to help improve downside behavior during sharp market corrections rather than remaining anchored to stale momentum signals.
SPY follows a passive broad-market approach with no active risk management or momentum-based repositioning. The fund holds all S&P 500 constituents at all times, meaning it fully participates in both market rallies and declines. In rapidly changing markets, the S&P 500 (SPY) does not rotate away from deteriorating trends or toward emerging strength—it simply mirrors the index.
The difference in risk management can emerge during extended drawdowns, such as 2008 or 2022. FMTM's monthly rebalance and shorter lookback are designed to shift the portfolio toward relative strength, even as broad equity stress persists. Market corrections don’t make capital disappear—they redirect it. When market trends change and previous leaders come under pressure, capital typically rotates elsewhere. Leadership changes, which can present new opportunities. By updating monthly and emphasizing recent price behavior, FMTM aims to capture those shifts. SPY, by contrast, holds every S&P 500 company regardless of trend direction, meaning it always holds positions that may be in declining trends alongside those in rising trends.
Common FAQs
1. Tax Efficiency – Does FMTM's higher portfolio turnover impact the tax efficiency of the fund?
Monthly rebalancing does generate more portfolio turnover than semi-annual rebalancing. However, the ETF structure can help maintain tax efficiency and minimize tax consequences. The in-kind creation and redemption process allows appreciated securities to be transferred out of the portfolio without triggering taxable sales at the fund level, thereby minimizing taxable capital gains. This mechanism, which is standard across U.S. ETFs, allow the strategy to adjust holdings systematically while reducing the likelihood of capital gain distributions to shareholders. To date, FMTM has not made any capital gains distributions. All ETFs, including FMTM, cannot guarantee tax outcomes and investors may still receive taxable distributions. Investors should consult their own tax advisors regarding the tax consequences of an investment in the Fund.
2. Rebalance Timing – FMTM rebalances monthly and actively selects holdings, while SPY passively holds the entire S&P 500. Does this matter?
Yes, rebalance timing can meaningfully impact outcomes. A monthly rebalance allows FMTM to adjust more quickly as market leadership changes, potentially rotating away from weakening trends into emerging ones. In contrast, SPY makes no active portfolio changes. It holds all S&P 500 companies at all times. The trade-off is straightforward: active management introduces higher turnover but offers the potential for better risk-adjusted returns, while passive indexing provides the lowest cost and broadest diversification but with no ability to respond to shifting market leadership.
3. Risk Management – Why does a smaller portfolio drawdown matter so much?
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 9% decline requires less than a 10% rebound. Smaller drawdowns can reduce recovery time and make it easier for investors to stay disciplined during periods of volatility. Since inception, FMTM’s maximum drawdown of −12.1% compares favorably to S&P 500’s (SPY) −13.7%. Limiting peak-to-trough losses is a meaningful risk-management outcome.
4. Fund Size – FMTM only has around $116M in assets compared to SPY's +$670 billion. Is that a red flag?
FMTM launched in 2025, while SPY launched in 1993—a thirty-two-year head start. SPY is the largest ETF in the world, and its asset size reflects decades of adoption as the default U.S. equity benchmark. FMTM's $116 million in assets does not constrain its ability to execute its strategy. More importantly, FMTM has delivered meaningfully different results since inception (+57.9% versus SPY's +26.8%). Performance outcomes, not fund size, should inform allocation decisions.
5. Bid/Ask Spreads – Does FMTM's smaller AUM impact its bid ask spread?
A smaller fund does not necessarily mean wider bid-ask spreads. ETF liquidity is driven primarily by the liquidity of underlying holdings, not fund size alone. FMTM requires each portfolio holding to trade a minimum of $25 million daily. The holdings are highly liquid U.S. equities, meaning the underlying securities themselves are easy to trade even when the ETF's secondary market volume is light. That said, investors should still use limit orders and trade during normal market hours to ensure efficient execution.
6. Portfolio Overlap – How much overlap is there with SPY?
SPY holds all the S&P 500 companies, while FMTM typically holds 30 to 50 stocks drawn from both large- and mid-cap companies. Because FMTM selects only stocks exhibiting the strongest momentum signals and equal-weights its positions, its portfolio will differ substantially from SPY at any given time. FMTM may hold some SPY constituents when they exhibit strong momentum, but it also accesses mid-cap companies outside SPY's universe. The two funds can work as complements: SPY provides broad-market exposure while FMTM offers a concentrated momentum overlay.
7. Fees – Is FMTM’s higher expense ratio worth it?
SPY charges 0.09%, while FMTM charges 0.45%. The difference reflects FMTM's active management and monthly rebalancing versus SPY's passive indexing. While fees are an important consideration, investors should evaluate outcomes on more than just expense ratios alone. Since inception, FMTM's net-of-fee returns have exceeded SPY's by a meaningful margin. If a strategy’s structure leads to materially different performance or risk characteristics, the relevant comparison is total return net of costs.
8. Performance Cycles – In what market environments might FMTM or MTUM underperform?
FMTM is a momentum strategy, and momentum can lag during sharp market reversals or highly volatile “whipsaw” environments where leadership changes quickly. FMTM may underperform SPY during narrow mega-cap-led rallies where equal-weight positioning lags market-cap weighted strategies. Conversely, SPY may underperform during markets that are trending up or down where active momentum selection captures emerging leadership more effectively.
9. Portfolio Allocation – Should I hold FMTM in a Roth or retirement account due to its higher turnover?
Not necessarily. While FMTM's monthly rebalancing results in higher portfolio turnover, the ETF structure minimizes capital gain distributions through the in-kind creation and redemption process. Higher turnover does not automatically translate into taxable capital gains for shareholders. To date, FMTM hasn’t made any capital gains distributions and can be held in taxable or tax-advantaged accounts, depending on one’s portfolio structure. Investors should consult their tax professional to assess how FMTM or SPY fit within their specific tax situation and overall asset location strategy.
When to Choose FMTM vs. SPY
The choice between FMTM and SPY depends on investment philosophy and portfolio objectives. Both can be used in taxable or tax-advantaged accounts, and both can play distinct roles within a portfolio. FMTM may appeal to investors willing to pay a higher fee for quantitative momentum management focused on trend consistency and quality with built-in risk management. SPY may suit investors prioritizing the lowest possible cost and the broadest passive market exposure. FMTM's approach to U.S. large- and mid-cap momentum is differentiated by its monthly rebalancing cadence and concentrated equal-weight positioning, which enables faster response to shifting market leadership. Some investors may use FMTM as a momentum sleeve alongside a core SPY holding, while others may view it as an alternative to broad-market indexing for a portion of their equity allocation.
Consider this when... | FMTM | SPY |
Account type | Taxable or tax-advantaged | Taxable or tax-advantaged |
Fee sensitivity | Willing to pay for active management | Lower cost broad-market exposure |
Momentum philosophy | Trend consistency and quality | None (holds entire S&P 500) |
Portfolio role | Higher-conviction, active momentum | Core broad-market exposure |
Universe preference | U.S. Large and Mid Caps | U.S. Large Caps only |
Rebalance preference | Faster, monthly response to markets | Passive (no active rebalancing) |
Ready to Learn More About FMTM?
To learn more about the strategies or discuss how FMTM fits within a portfolio, contact our team info@marketdeskindices.com.
Performance Disclosure
Short-term performance may often reflect conditions that are likely not sustainable, and thus such performance may not be repeated in the future.
The information contained herein is provided for informational purposes only and is from sources believed to be reliable. However, its accuracy, completeness, or reliability are not guaranteed. MarketDesk Indices LLC makes no representations or warranties concerning the accuracy of any data. There is no guarantee that any opinion in this material will be realized. Nothing herein constitutes or should be construed as an offering of securities or a recommendation to purchase or sell securities. Investors should determine for themselves whether a particular service or product is suitable for their investment needs. Please refer to the disclosure and offering documents for further information concerning specific products or services.
Definitions
S&P 500 Index – S&P 500 Index represented by the State Street SPDR S&P 500 ETF (SPY). The S&P 500 is a market-capitalization-weighted index tracking the performance of 500 of the largest publicly traded companies in the U.S. Indexes are unmanaged and not available for direct investment. References to third-party funds are for informational purposes only and should not be considered investment advice or a recommendation of any particular security, strategy, or investment product.
Max Drawdown – The largest decline in the value of an investment from its highest point to its lowest point before a new high is reached. It measures the peak-to-trough loss experienced during a specific period and is commonly used to understand the potential downside risk of a strategy or investment.
Max Drawdown Length – Maximum drawdown length is the amount of time it takes for an investment to recover from its largest peak-to-trough decline and return to its previous high. It measures the duration of the recovery period following the maximum drawdown. For example, if an investment reaches a high, declines significantly, and takes 18 months to regain that prior high, the maximum drawdown length would be 18 months.
Bid/Ask Spreads – Bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a security, reflecting market liquidity and transaction costs.
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