Combining Quality and Momentum ETFs

A subscriber asked about the performance of a 50-50 combination of a basket of momentum stock exchange-traded funds (ETF) and a basket of quality stock ETFs, specifically with comparison to a 50-50 combination of the Simple Asset Class ETF Value Strategy (SACEVS) and the Simple Asset Class ETF Momentum Strategy (SACEMS). To investigate, we employ results from:

• The EW portfolio of momentum ETFs in “Are Equity Momentum ETFs Working?” as the basket of momentum ETFs.
• The equal-weighted (EW) portfolio of quality ETFs in “Are Stock Quality ETFs Working?” as the basket of quality ETFs.
• The 50-50 SACEVS Best Value-SACEMS EW Top 2 portfolio.

We assume monthly rebalancing of the 50-50 momentum-quality portfolio. We focus on monthly return statistics, along with compound annual growth rates (CAGR) and maximum drawdowns (MaxDD). We also use SPDR S&P 500 ETF (SPY) to assess effectiveness of the factor portfolios. Using monthly total returns from the above three sources and SPY during April 2007 (limited by momentum ETF data) through October 2025, we find that: (more…)