FMTM vs. VFMO: Which Momentum ETF Belongs in Your Portfolio?
- Mar 23
- 12 min read
FMTM and VFMO both offer exposure to U.S. momentum stocks, but they employ very different methodologies and produce very different results. 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 2/28/2026. All performance data is based on the net asset value (NAV) unless otherwise noted.
Executive Summary
Same Goal, Different Implementation: FMTM and VFMO both target U.S. equity momentum, but their approaches differ significantly. FMTM employs an active, equal-weighted approach across large- and mid-caps with monthly rebalancing, while VFMO uses an actively managed model across all-cap U.S. equities with generally quarterly rebalancing.
How Momentum Is Defined: The two funds use fundamentally different selection criteria. FMTM emphasizes 6-month trend consistency, whereas VFMO uses a model to evaluate trailing 12-month price momentum. This distinction shapes which stocks are selected and when positions shift, which ultimately impacts each fund’s responsiveness to trend changes.
Different Performance Results: Since FMTM's March 19th, 2025 inception, methodology differences have resulted in substantial performance divergence. FMTM has returned +48.8% with a −9.2% maximum drawdown and 28 day max drawdown period, compared to VFMO's +33.9% return with a −16.2% drawdown and a 40 day max drawdown period, a material gap that illustrates how methodology impacts performance outcomes.
Risk Management Varies: FMTM's monthly rebalancing allows it to respond faster during volatility spikes and trend changes, while VFMO's broadly diversified all-cap approach and higher number of holdings can dilute momentum conviction. The frequency of portfolio adjustments 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 VFMO may appeal to those seeking broad, diversified momentum exposure across all market capitalizations at a low cost. The right choice hinges on existing portfolio structure and the role momentum is intended to fill.
How Each Fund Is Built
VFMO – Quantitative Active Momentum
VFMO is an actively managed ETF from Vanguard that evaluates U.S. companies of all sizes for strong recent price momentum. It selects and weights approximately 500 to 750 stocks based on trailing 12-month momentum scores. The approach is broadly diversified across hundreds of companies and low cost. It generally rebalances quarterly, which keeps turnover low. The broad all-cap universe and high holding count ensure diversification across sectors and market capitalizations.
FMTM – Quantitative Momentum Built Around Trend Quality
FMTM takes a different approach to momentum. 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, providing a more concentrated, conviction-weighted approach to momentum compared to VFMO's broadly diversified portfolio. 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.
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 +48.8% return compared to VFMO (+34.0%), XMMO (+29.0%), FDMO (+27.6%), SPMO (+26.4%), JMOM (+23.9%), and MTUM (+23.9%), while the S&P 500 (SPY) returned +21.0%.
Downside experience also varied across approaches. FMTM experienced a maximum drawdown of −9.2%, 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 28 days from peak to trough to full recovery. By comparison, VFMO spent 40 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 momentum objective, 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 | +48.8% | -9.2% | 28 days | +27.7% |
VFMO | +33.9% | -16.2% | 40 days | +12.8% |
XMMO | +29.0% | -13.9% | 27 days | +7.9% |
FDMO | +27.4% | -14.8% | 47 days | +6.3% |
SPMO | +26.4% | -15.2% | 87 days | +5.3% |
MTUM | +23.9% | -14.3% | 48 days | +2.8% |
JMOM | +23.9% | -13.7% | 31 days | +2.9% |
S&P 500 (SPY ETF) | +21.1% | -13.7% | 33 days | +0.0% |
Data represents the period since FMTM’s inception date on 3/19/2025 through 2/28/2026. 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.
Side-by-Side Comparison of Key Characteristics
FMTM and VFMO both seek to capture U.S. equity momentum, but they differ meaningfully in structure and implementation. FMTM, launched in March 2025, is an actively managed quantitative ETF with a 0.45% expense ratio and assets of approximately $80 million. VFMO, launched in February 2018, is an actively managed ETF with a 0.13% expense ratio and manages roughly $1.3 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, VFMO owns approximately 500 to 750 companies selected from the entire U.S. equity market (all-cap), weighted by momentum score, and updated on an ongoing basis.
The underlying momentum signals are distinct. FMTM emphasizes consistency and quality of price trends over a six-month lookback, while VFMO uses a trailing 12-month price momentum. Since FMTM's inception, these signal differences have produced distinct outcomes: FMTM returned +48.8% with a −9.2% maximum drawdown compared to VFMO's +34.0% return and −16.2% drawdown. The structural and methodological differences explain why two funds pursuing the same objective have delivered materially different portfolio characteristics and results.
Fund Characteristic | FMTM — MarketDesk | VFMO — Vanguard |
Strategy Type | Active / Quantitative | Active |
Expense Ratio | 0.45% | 0.13% |
Inception Date | March 2025 | February 2018 |
Asset Under Management | ~$80M | ~$1.3B |
# of Holdings | 30–50 | 500–750 |
Weighting Style | Equal-weight | Momentum-score weighted |
Rebalance Frequency | Monthly | Quarterly (generally) |
Universe | U.S. Large and Mid Caps | U.S. Large Mid and Small Caps |
Lookback Period | 6 months | 12 months |
Momentum Signal | Consistency + quality of price trend | Stocks with strong recent performance |
Return Since FMTM Inception | +48.8% | +33.9% |
Return vs S&P 500 (SPY) | +27.7% | +12.8% |
Max Drawdown % | −9.2% | −16.2% |
Max Drawdown Length | 28 days | 40 days |
Data as of 2/28/2026. Sources: MarketDesk Indices, Morningstar.com. For illustrative purposes only.
Comparing VFMO 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.
VFMO follows a quarterly rebalance schedule and a broad all-cap universe. While its continuous adjustment process provides flexibility, the fund's high holding count (500–750 positions) and broad diversification can dilute the impact of its strongest momentum signals. In rapidly changing markets, the sheer breadth of the portfolio may slow the concentration of capital into the highest-conviction opportunities.
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. VFMO, by contrast, remains more static between rebalances across hundreds of positions, potentially diluting the impact of its momentum signals.
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 with a concentrated portfolio, while VFMO rebalances quarterly with a broadly diversified portfolio. 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. VFMO’s quarterly rebalance and its broad diversification across 500–750 holdings means each position contributes less to overall returns. The trade-off is straightforward: a concentrated portfolio like FMTM can capture more upside from its best ideas, while a broadly diversified portfolio like VFMO provides smoother factor exposure but with potentially less upside capture.
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 −9.2% compares to VFMO’s −16.2% and the S&P 500’s −13.7%. Limiting peak-to-trough losses is a meaningful risk-management outcome.
4. Fund Size – FMTM only has around $80M in assets compared to VFMO's $1.3 billion. Is that a red flag?
FMTM launched in 2025, while VFMO launched in 2018—a seven-year head start. Asset size is often a lagging indicator of fund quality, not a leading one. FMTM's $80 million in assets does not constrain its ability to execute the strategy. More importantly, FMTM has delivered meaningfully different results than larger momentum peers (+48.8% since inception versus +34.0% for VFMO). Performance, not fund size, should drive investment 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 VFMO?
VFMO draws from the entire U.S. equity market across all capitalizations and holds 500–750 positions. While both funds access large- and mid-cap momentum, FMTM's concentrated 30–50 holding approach focuses capital on the strongest signals. Because FMTM is not anchored to a market-cap-weighted index and uses equal-weight positioning, it avoids the concentration and index-hugging behavior common in passive funds. As a result, its holdings often differ meaningfully from traditional large-cap momentum ETFs, potentially enhancing diversification within the momentum factor.
7. Fees – Is FMTM’s higher expense ratio worth it?
VFMO charges 0.13%, while FMTM charges 0.45%. The difference reflects FMTM's active management and monthly rebalancing. The strategy incorporates a differentiated momentum signal focused on trend consistency and quality rather than simply ranking 12-month returns. While fees are an important consideration, investors should evaluate outcomes on more than just expense ratios alone. If a strategy’s structure leads to materially different performance or portfolio risk characteristics, the more relevant comparison is total return net of fees.
8. Performance Cycles – In what market environments might FMTM or VFMO underperform?
Both FMTM and VFMO are momentum strategies, and momentum can lag during sharp market reversals or highly volatile “whipsaw” environments where leadership changes quickly. VFMO may underperform when its broad diversification dilutes exposure to the strongest momentum trends. FMTM, while more responsive due to monthly rebalancing and concentrated positioning, may underperform during narrow mega-cap-led rallies where equal-weight positioning lags market-cap weighted strategies. As with any factor exposure, periods of relative underperformance are a normal part of long-term implementation.
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 VFMO fit within their specific tax situation and overall asset location strategy.
When to Choose FMTM vs. VFMO
The choice between FMTM and VFMO depends on implementation preferences and portfolio objectives. Both can be used in taxable or tax-advantaged accounts. FMTM may appeal to investors willing to pay a higher fee for quantitative management focused on trend consistency and quality with built-in risk management. VFMO may suit investors seeking broadly diversified, low-cost momentum exposure across all market capitalizations. FMTM's approach to U.S. large- and mid-cap momentum is differentiated by its monthly rebalancing cadence, which enables faster response to shifting market leadership. This responsiveness appeals to investors seeking active momentum management rather than a quarterly rebalance schedule.
Consider this when... | FMTM | VFMO |
Account type | Taxable or tax-advantaged | Taxable or tax-advantaged |
Fee sensitivity | Willing to pay for active management | Low-cost broad momentum exposure |
Momentum philosophy | Trend consistency and quality | 12-month trailing returns |
Portfolio role | Higher-conviction, active momentum | Broad, diversified momentum exposure |
Universe preference | U.S. Large and Mid Caps | U.S. Large, Mid, and Small Caps |
Rebalance preference | Faster, monthly response to markets | Slower, quarterly |
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.
ETFAC-5274631-03/26
Comments