Unlocking Momentum: How SPMO Outperforms Traditional S&P 500 ETFs in a Modern Portfolio

In the ever-evolving landscape of passive investing, the S&P 500 remains a cornerstone for long-term wealth creation. Yet, as investors seek to refine their strategies, momentum investing has emerged as a compelling approach to amplify returns while managing risk. The Invesco S&P 500® Momentum ETF (SPMO) offers a unique lens into this strategy, leveraging the power of momentum within the S&P 500 to outperform traditional ETFs like SPY and IVV. This article examines SPMO's cost efficiency, performance, and risk-adjusted returns to argue for its strategic role in a modern portfolio.

Cost Efficiency: SPMO vs. SPY and IVV

While SPMO's expense ratio of 0.13% is higher than SPY's 0.09% and IVV's 0.03%, it remains a competitive option in its category. The average expense ratio for Large Blend ETFs is 0.74%, making SPMO one of the most cost-efficient momentum-focused funds. For context, on a $10,000 investment, SPMO's annual fee is $13, compared to $9 for SPY and $3 for IVV. While IVV is the cheapest, SPMO's fee is justified by its specialized momentum strategy, which targets the S&P 500's most dynamic stocks.

Performance: Momentum's Edge

SPMO's performance metrics tell a compelling story. Over the past year, it delivered a 30.46% total return, far outpacing SPY and IVV's 14.78% and 14.80% returns. This outperformance stems from its focus on high-momentum stocks, which are typically those with strong recent price trends. By rotating into these stocks twice annually, SPMO captures growth in sectors and companies gaining traction, a strategy that has paid dividends in 2025's volatile markets.

For example, in Q3 2025, SPMO returned 7.43%, while the S&P 500 itself gained just 0.96%. This 6.47% outperformance underscores the fund's ability to capitalize on market momentum, even in sideways or declining environments.

Risk-Adjusted Returns: A Sharper Focus

Beyond raw returns, SPMO's risk-adjusted metrics are where it truly shines. Its Sharpe ratio of 1.13 for the most recent quarter exceeds the broader market's 0.98, indicating superior returns per unit of risk. The Sortino ratio of 1.69 and Omega ratio of 1.24 further highlight its ability to generate gains while minimizing downside volatility.

In contrast, SPY and IVV, while reliable, lag in these metrics. SPY's Sharpe ratio is 0.76, and IVV's is 0.79, both significantly lower than SPMO's. The Calmar ratio, which measures returns relative to maximum drawdowns, also favors SPMO at 1.44, compared to SPY and IVV's 0.80. These figures suggest that SPMO not only delivers higher returns but does so with a more favorable risk profile.

Strategic Implications for Modern Portfolios

The case for SPMO lies in its ability to combine momentum's growth potential with disciplined risk management. Traditional S&P 500 ETFs like SPY and IVV offer broad exposure but lack the dynamic allocation to high-momentum stocks that SPMO provides. For investors seeking to enhance returns without sacrificing diversification, SPMO serves as a strategic complement.

Consider a hypothetical portfolio allocating 70% to IVV and 30% to SPMO. The lower expense of IVV ensures cost efficiency, while SPMO's momentum strategy adds a layer of growth potential. This hybrid approach balances the strengths of both funds, leveraging IVV's low fees and SPMO's risk-adjusted outperformance.

Conclusion: A Momentum-Driven Future

While SPMO's expense ratio is higher than SPY and IVV, its performance and risk-adjusted returns justify the cost for investors prioritizing growth and efficiency. In a market where momentum can amplify returns, SPMO offers a compelling case for inclusion in a modern portfolio. As the S&P 500 continues to evolve, funds like SPMO will play an increasingly vital role in capturing the next wave of market opportunities.

For those ready to embrace momentum, the data is clear: SPMO is not just an alternative to traditional S&P 500 ETFs—it's a strategic upgrade.