The Vanguard U.S. Momentum Factor ETF (NYSEMKT: VFMO) is delivering one of the standout performances of 2026, leaving the benchmark index well behind.
The fund has returned 18.5% so far this year as of the market close on September 10, while the S&P 500 has managed just 10.9% over the same period.
This outperformance is not a fluke, as the ETF has beaten the market every year on average since its launch in 2018.
The fund uses mathematical models to identify stocks that are trending higher, placing particular emphasis on those showing sustained returns over the last 12 months of trading.
Models also analyze momentum over the last six months to confirm that upward trends remain intact, and run calculations to distinguish stock-specific gains from broader market moves.
As of September 9, the ETF held 697 stocks across nine economic sectors, with technology leading at 25.1%, followed by healthcare at 20.8% and industrials at 19%.
Six of the fund’s top 10 holdings are technology stocks, including Sandisk, Micron Technology, Dell Technologies, Advanced Micro Devices, Intel, and Applied Materials.
Those six stocks have delivered a median return of more than 300% over the last 12 months, far exceeding the 16% return posted by the S&P 500 during that stretch.
The fund carries an extremely high turnover rate of 99.9%, meaning it can be expected to replace nearly every single holding in its portfolio over the course of a year.
Remarkably, not even Nvidia has consistently held its place in this ETF over the last few years despite its incredible overall return.
Top fund managers like Peter Lynch and Paul Tudor Jones have long credited their success to letting winning investments run while quickly cutting losers.
Lynch famously compared doing the opposite to cutting the flowers and watering the weeds in a garden, a strategy that would make no rational sense.
The Vanguard U.S. Momentum Factor ETF has delivered a compound annual return of 14.9% since its 2018 launch, compared to an average of 14.1% per year for the S&P 500 over the same period.
That edge has held through significant market disruptions, including the COVID-19 pandemic in 2020, the inflation spike in 2022, and the Trump administration’s sweeping tariffs in 2025.
Even if artificial intelligence and semiconductor stocks stop leading the market higher, the ETF’s mathematical models are designed to rotate holdings quickly as conditions change.
Investors considering VFMO should note its expense ratio of 0.13%, which translates to an annual fee of $13 for every $10,000 invested.
That cost is roughly four times higher than some of Vanguard’s index funds, which carry expense ratios as low as 0.03%, though its returns have more than compensated for the difference so far.
