As we propel ourselves into 2026, and today’s ETF discussion, I would like to share a quote from the well-known theoretical physicist, Albert Einstein: “Nothing happens until something moves.” Think about that for a moment, as I’m sure we can all apply it to our lives and many situations we find ourselves in. Mind you, that is not to say there are not times when it is pertinent to be still — as being still is sometimes as important as moving.
Today, however, I would like to focus on movement, or “momentum,” to be exact. The past few weeks have all been centered around momentum factor exchange-traded funds, and that feels appropriate as we enter the new year. Momentum factor ETFs are funds that invest in stocks showing strong recent performance, i.e., high price momentum and improving earnings/fundamentals, with the belief that these upward trends will continue. Simply put, these ETFs aim to buy “winners” and sell “losers” in a diversified package. The ETF that I have chosen to propel us into 2026 is no different.
The Fidelity Momentum Factor ETF (FDMO) is what happens when disciplined quantitative investing meets momentum. Now, the term momentum can be seen negatively — when it conjures the idea of hot-hand chasing or simply buying up “strong” stocks with no guarantees for future success. But FDMO is here to polish “momentum’s” tarnished reputation, as it approaches the strategy with a calculator in one hand and a risk model in the other.
The fund seeks to capture stocks that are already doing something right — and doing it consistently. Using Fidelity’s proprietary momentum factor model, this ETF identifies U.S. large- and mid-cap companies that have exhibited strong risk-adjusted price momentum, meaning they’re not just going up, but doing so with a level of stability that won’t keep investors up at night worrying about their hard-earned money — at least not every night.
FDMO’s appeal largely comes from its rules-based discipline. There’s no one manager making gut calls or reacting to headlines. Instead, stocks are selected and weighted based on quantitative signals such as price trends, volatility and other risk controls. The fund rebalances semi-annually, trimming winners that have overstayed their welcome and rotating into new momentum names — because as any savvy investor knows, yesterday’s winner can become tomorrow’s loser at the speed of light.
Moreover, FDMO may appeal to investors seeking factor diversification opposed to static exposure, as its portfolio structure tends to look different from traditional market-cap-weighted ETFs like the S&P 500. The fund’s sector exposure can shift meaningfully over time, depending on where momentum is strongest. At times, technology and consumer discretionary may dominate; at others, industrials, financials or even defensive sectors can take the lead.
If all the above information has not proven propelling enough, let’s talk about the fund’s reasonable expense ratio, which sits at 0.15% — sure, it’s not the cheapest ETF out there, but it is priced competitively for a smart-beta strategy that aims to deliver excess returns over the long term. On the topic of financials, FDMO has $586.51 million in net assets and $615.16 million in assets under management. What’s more enticing? The fund offers a forward dividend yield of 0.70% as of Dec. 30 and paid out approximately $0.51 per share over the past year.
Courtesy of stockcharts.com.
The chart above is a prime example of momentum — the embodiment of movement, really. FDMO’s April dip is no surprise, as April was a rocky month for the market as a whole. But, unlike the market as a whole, the fund not only regained its momentum, but continued to propel itself up toward new highs. Currently, it is trading near the top of its 52-week range of $55.41-85.97, opening at $84.73.
The fund’s top 10 holdings currently include NVIDIA Corporation (NASDAQ:NVDA), 7.76%; Microsoft Corporation (NASDAQ:MSFT), 6.76%; Alphabet Inc. (NASDAQ:GOOGL), 5.64%; Broadcom Inc. (NASDAQ:AVGO), 4.12%; Amazon.com, Inc. (NASDAQ:AMZN), 3.97%; Meta Platforms, Inc. (NASDAQ:META), 2.53%; Tesla, Inc. (NASDAQ:TSLA), 2.31%; Berkshire Hathaway Inc. (NYSE:BRK-B), 1.89%; JPMorgan Chase & Co. (NYSE:JPM), 1.74% and Johnson & Johnson (NYSE:JNJ), 1.57%.
Ultimately, FDMO is for investors who believe markets have memory, trends have persistence and discipline beats emotion. It’s not about predicting the next big thing — it’s about staying invested in what’s already working, until the data says otherwise. For investors looking to add a systematic edge without venturing into speculative territory, FDMO may fit the bill. So, as we discussed, “nothing happens until something moves,” and it is time to move, nay, propel ourselves into the next year with our finger on the profit pulse!
And, as always, investors should always do their due diligence before adding any stock, fund or ETF to their portfolios.
Finally, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.
