An ETF that buys winners
NFEMOM is the Absa New Funds Momentum exchange-traded fund (ETF) that selects the stocks within the ETF using a simple momentum methodology. In other words, buying the winners using pure price movement. When it was initially launched, the ETF used a three-month look-back period that I considered too short, but late last year they changed the methodology to now use a 12-month look-back period, which is exactly what I use.
I started running a self-managed momentum ETF back in 2007 using the Top40, before expanding it to also include the MidCap Index at the beginning of 2013. I restructured it last year to avoid concentration risk, expanding the portfolio to include 15 stocks.
The system has worked well, with the occasional year of underperformance but beating the market handsomely over any three-year period. However, tax was a drag on profits and 15 stocks added significantly to my portfolio holding, which is currently only 13 stocks. So, I decided to keep things simple and switch my momentum portfolio into this momentum ETF.