Let’s analyze two of the best ETFs on the market that take a position on Momentum.
In the context of financial investments, momentum analysis represents an approach of significant relevance. This strategy is based on the belief that financial assets in a persistent growth trend tend to continue on this trajectory in the short term.
Institutional and individual investors, looking for instruments that offer exposure to this tactic, often turn to Exchange-Traded Funds (ETF) Momentum.
This article explores the best Momentum ETFs that deserve attention in 2024, highlighting their characteristics, historical performance, and potential contributions to a diversified portfolio.
1. iShares Edge MSCI World Momentum Factor
The iShares Edge MSCI World Momentum Factor UCITS ETF (Acc) is a passively managed fund that tracks the performance of the MSCI World Momentum Index, which includes shares from 23 developed countries around the world with a high price momentum. The fund is characterized by a Total Expense Ratio (TER) of 0.30% per year, which represents the overall cost of managing the ETF. However, this ETF is known to be one of the largest in its segment, with assets under management of approximately 1,405 million Euros, which suggests good liquidity and financial strength.
The replication strategy used by the ETF is based on optimized sampling, which means that it does not necessarily hold all the stocks in the benchmark index, but rather concentrates investments on the most relevant stocks. Furthermore, the dividends generated by the shares in the ETF are accumulated and reinvested, thus contributing to the growth of the capital invested in the fund.
A look at portfolio composition reveals that the top 10 holdings represent 33.73% of the ETF, with companies like NVIDIA CORP, META PLATFORMS INC A, and MICROSOFT CORP among the top holdings. Regarding geographic allocation, the United States dominates with 52.76%, followed by Japan, France, and the United Kingdom.
In terms of performance, the ETF has demonstrated good performance over the years, returning +6.93% in the current year, +18.54% in the last 3 years and +65, 31% in the last 5 years. However, it should be noted that the ETF has declined by -12.80% in 2022, which may be of concern to investors.
Regarding risk, the ETF has an annual volatility of 12.51%, with a 1-year maximum drawdown of -8.74% and a 3-year maximum drawdown of -21.59%. These data indicate some stability, in the short term, but are not immune to significant fluctuations.
2. Xtrackers MSCI World Momentum Factor
The Xtrackers MSCI World Momentum Factor UCITS ETF 1C is another fund that aims to replicate the MSCI World Momentum Index, with a similar investment strategy to the iShares ETF. However, it stands out with its lowest TER, which stands at 0.25% per annum, making it the cheapest ETF in the category.
The ETF is of significant size, with assets under management of approximately €864 million, which also makes it a liquid and stable choice for investors. The ETF was launched in 2014 and is domiciled in Ireland.
Again, the ETF uses an optimized sampling replication strategy and accumulates dividends by reinvesting them in the ETF. Portfolio composition shows that the top 10 holdings represent 33.98% of the ’ETF, with the same major companies, such as NVIDIA CORP, META PLATFORMS INC A, and MICROSOFT CORP, among the top positions. The geographic allocation is similar to the iShares ETF, with a strong US presence.
In terms of performance, the ETF has demonstrated good performance in recent years, returning +6.99% in the current year, +18.87% in the last 3 years, and +65.99 % in the last 5 years. Again, it should be noted that the ETF declined by -12.75% in 2022.
In terms of risk, the ETF has an annual volatility of 12.50%, with a 1-year maximum drawdown of -8.72% and a 3-year maximum drawdown of -21.39%. These indicators point to similar stability to the iShares ETF.
Comparison between the two ETFs
Both ETFs follow a similar strategy of tracking the MSCI World Momentum Index, with a slight difference in TER, with the Xtrackers ETF having a slightly lower cost. Both ETFs are of significant size and have good liquidity.
In terms of performance, both have demonstrated similar returns in recent years, with fluctuations linked to market conditions. 2022 was a year of losses for both ETFs, which could raise questions about the strategy’s effectiveness in times of volatility.
In terms of risk, both have similar volatility and comparable maximum drawdowns.
The choice between the two ETFs may depend primarily on cost and individual investor preferences, but both represent viable investment products for those seeking exposure to global stock market momentum.
| Disclaimer The information and considerations in this article should not be used as the sole and principal basis for making investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them since he alone knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings. |
Original article published on Money.it Italy 2023-12-14 19:01:00. Original title: I migliori ETF Momentum da tenere monitorati nel 2024
