The abundance of variety in the exchange traded fund (ETF) market is truly remarkable, and making a decision as to which ETF to choose can be daunting. From index-tracking ETFs to sector-specific options, active vs. passive ETFs, and those focusing on specific strategies such as value, growth, or momentum all provide unique options for investors looking to put their money to work and sit on a group of stocks for an extended period of time.
In this article, I’m going to discuss some of the differences between value and momentum ETFs, and what investors can expect from both funds moving forward.
If the past is any indication of the future, momentum funds should continue to outperform as technology stocks and stocks in sectors which have outperformed in recent years continue their upward climb.
As certain market capitalization-heavy stocks grow to a larger and larger percentage of the overall stock market, however, momentum-related ETFs will undoubtedly provide increased risk should the market turn, as upward momentum potentially shifts the opposite direction.
This relationship is always true, however momentum investors have outperformed value investors for some time now relying on this more aggressive trading strategy compared to a more conservative investing approach.
I am biased in the sense that I am a value investor, and would only consider those ETFs with a value mandate due to the increased systemic risk I view the market holding at this point in time.
Investors should always consult an investment advisor before making any investment decisions, however I would suggest investors pick the ETF that suits their investment mandate the best.
Invest wisely, my friends.
