For most index investors, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is the default core holding: cheap, liquid, and broadly representative of U.S. large caps. SPY tracks the S&P 500 Index at a 0.0945% expense ratio, which is why it has functioned as the bedrock allocation for retail and institutional portfolios alike. The question worth asking in 2026 is whether a closely related factor ETF that owns most of the same names in different proportions has done a better job of capturing the run the S&P 500 has actually delivered.
That cousin is the iShares MSCI USA Momentum Factor ETF (NYSEARCA:MTUM). Through June 16, 2026, MTUM was up 30.52% year-to-date, compared with SPY’s 10.34%, a gap of roughly 20 percentage points. The fund’s structure explains most of that lead.
What SPY Is Actually Holding Right Now
SPY’s weighting is mechanical: market cap decides everything. That design has produced a portfolio where Information Technology now accounts for roughly 34% of assets, with NVIDIA leading at approximately 7.75%, Apple close behind at around 7.55%, and Microsoft at about 4.60%. Together, the top three names combine for close to 20% of the fund. That concentration drove SPY’s gains over the past two years, but it is also the ceiling on its upside. The fund weights leaders in proportion to their market cap rather than trend strength, which means yesterday’s winners and today’s laggards get carried along at full weight.
How MTUM Selects Differently
MTUM is built to do exactly what SPY cannot: tilt toward what is actually trending. The fund tracks the MSCI USA Momentum SR Variant Index, which screens U.S. large- and mid-cap stocks for relatively higher price momentum using risk-adjusted six- and twelve-month returns. The index reconstitutes semiannually, in May and November, rotating holdings into whichever cohort has been compounding the strongest into the rebalance date. In a year when AI-linked semiconductors, hyperscalers, and a handful of platform names have led the market, MTUM ends up overweighting those winners and excluding the laggards that still drag on a cap-weighted index. SPY must own the laggards; MTUM is designed to leave them behind.
The Edge, Quantified
The current-year gap is the headline, but longer windows matter more for anyone evaluating a core swap. Over the trailing one-year window, MTUM returned 42.90% versus SPY’s 27.13%. Over five years, MTUM is up 104% against SPY’s 89%, a lead of roughly 15 percentage points. Over ten years, the spread widens further: MTUM at 391% versus SPY’s 325%. In every measured window from one year to ten, the momentum tilt has come out ahead.
The fee differential takes some of that back, though not much. MTUM charges 0.15% against SPY’s 0.0945%, a gap of roughly 5.5 basis points. On a $50,000 position, that translates to about $28 a year in extra fees: a trivial cost relative to the historical return spread.
The Tradeoffs Are Real
Momentum’s weakness is the direct flip side of its strength. The strategy buys what has been working, which means it can buy late into rallies and hold late into corrections. At inflection points, when leadership rotates from growth to value or from large-cap to small-cap, MTUM can lag SPY sharply for several quarters before the next semiannual rebalance catches up. That risk is not hypothetical. By early July 2026, MTUM had pulled back from its June highs and posted its worst weekly drop of the year, falling nearly 7% in the seven days ending July 2, as semiconductor stocks, which had come to represent a disproportionate share of the portfolio, came under pressure.
The fund also concentrates heavily into whatever led most recently into the rebalance. As of July 2026, semiconductors represented an outsized portion of MTUM’s roughly $27 billion in assets, making the fund’s near-term performance unusually sensitive to chip-sector moves. Beyond concentration risk, the portfolio turns over far more frequently than SPY, which has near-zero annual turnover. That higher churn makes MTUM less tax-efficient in a taxable account, and distributions of short-term capital gains are possible in years of heavy rotation.
How to Think About the Swap
For investors holding SPY in a tax-advantaged account, the mechanics of switching are simple: sell SPY, buy MTUM, no tax consequence. In a taxable account, the embedded gains in a long-held SPY position can make a full swap expensive. A partial allocation, directing new contributions or rebalancing flows into MTUM rather than liquidating existing SPY, lets an investor add the momentum tilt without triggering the existing gain. Given MTUM’s concentration risks heading into mid-2026, a partial position rather than a wholesale replacement is worth considering on its own merits regardless of tax situation.
The Decision in Front of You
SPY remains a defensible core position. The question is whether a cap-weighted index is the most efficient way to own the names already driving the market. Through June 2026, it was not. MTUM owns the same broad universe of U.S. large caps, weights them by what is actually trending, and charges roughly 5 basis points more per year for the privilege. Whether that tradeoff fits depends on time horizon, account type, concentration tolerance, and appetite for the whipsaw risk that comes with any momentum strategy.
Editor’s note: Holdings data for SPY has been updated to reflect current figures showing NVIDIA at approximately 7.75% and Apple at approximately 7.55% of the fund, both higher than figures cited at the original publication date. Post-publication context has been added covering MTUM’s roughly 7% weekly drawdown in early July 2026 and its growing semiconductor concentration, which materially affects the risk discussion in the tradeoffs section.
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