These alternative index strategies are beating the S&P 500 after the stock market's new highs

By Philip van Doorn

Invesco has nine factor approaches to tracking the S&P 500. All but one have beaten the index this year, and two have stood out since the stock market's March 30 low.

Since March 30, when the S&P 500 hit its low for the year, investors have been pouring money into exchange-traded funds tracking the S&P 500 Pure Growth and Momentum indexes.

How quickly are you as an investor getting used to the stock market's return to its record-setting ways? And how did you feel at the height of the conflict between the U.S., Israel and Iran?

It is always easy to look back after world events hammer stocks and repeat the lesson that most investors are better off not reacting during a time of crisis. You might be tempted to move your money to the sidelines at such a moment, with a plan to return after the market has started to recover. But you are likely to return late, since you cannot be sure when a sustained recovery has started. So any effort to time the market is likely to lower the long-term performance of your portfolio.

Patient investors in index funds have been rewarded. Based on closing prices, the S&P 500 SPX was down as much as 7.3% for 2026 through March 30. But from there it rose 12.1% through Monday after hitting its latest all-time closing high on Friday. So the index is up 3.9% for 2026 through Monday.

And according to Nick Kalivas, Invesco's head of factor strategy for exchange-traded funds, the pattern of money flows into and out of the firm's ETFs shows that "momentum has found favor since the low."

Kalivas was referring to the Invesco S&P 500 Momentum ETF SPMO, which he told MarketWatch had taken in $632 million in net inflow from March 30 through Friday. A traditional open-ended mutual fund's share price is called its net asset value and is calculated by dividing the value of the fund's holding by its number of shares. Investors in that type of fund can buy or sell shares only once a day, at the market close. So an open-ended fund will create and redeem new shares every day. For an ETF there are really two prices - its share price fluctuates when the stock market is open, while its NAV is calculated at the end of each day. If the share price begins to push significantly higher than the NAV, the ETF will issue new shares to bring the prices into balance, and vice versa. So for this type of index fund, a net inflow reflects investors' enthusiasm for a particular methodology.

Kalivas told MarketWatch that while SPMO had seen a quick inflow since March 30, the Invesco S&P 500 Equal Weight ETF RSP had experienced an outflow of $1.675 billion. Detailed descriptions of the nine Invesco S&P 500 factor ETFs are below.

How nine S&P 500 factor approaches have been performing as the stock market has changed direction

The S&P 500 price changes discussed above exclude dividends. Now let's look at total returns with dividends reinvested, for the SPDR S&P 500 ETF Trust SPX, which was the first exchange-traded fund to track the S&P 500 when it was established in 1993, and one of its largest competing funds, the Vanguard 500 Index ETF VOO, which was established in 2010. Both funds track the S&P 500 by holding all of its stocks weighed by market capitalization. SPY is the more liquid of the two, and its high daily trading volume makes it popular among traders. SPY's expense ratio is 0.0945%, which means annual fees of $9.45 for a $10,000 investment. VOO has a lower expense ratio of 0.03%.

The following table shows 2026 total returns through Monday, April 20, for SPY and VOO, and for nine Invesco factor ETFs that take various approaches to tracking subsets of the S&P 500 or to applying alternative weightings to the full index. Returns are also shown from the close on March 30 and from the end of 2025 through March 30.

   ETF                                                  2026 return through April 20  Return from March 30 through April 20  2026 return through March 30  2025 return 
   State Street SPDR S&P 500 ETF Trust                                          4.2%                                  12.1%                         -7.1%        17.7% 
   Vanguard 500 ETF                                                             4.2%                                  12.2%                         -7.1%        17.8% 
   Invesco S&P 500 Pure Growth ETF                                             15.5%                                  20.7%                         -4.3%        13.4% 
   Invesco S&P 500 Quality ETF                                                  7.6%                                   9.5%                         -1.8%        13.2% 
   Invesco S&P 500 Momentum ETF                                                 7.3%                                  18.4%                         -9.4%        26.6% 
   Invesco S&P 500 Pure Value ETF                                               7.1%                                   3.9%                          3.1%        17.7% 
   Invesco S&P 500 Equal Weight ETF                                             6.8%                                   8.4%                         -1.4%        11.2% 
   Invesco S&P 500 Revenue ETF                                                  6.8%                                   8.1%                         -1.3%        18.6% 
   Invesco S&P 500 High Dividend Low Volatility ETF                             5.6%                                   1.5%                          4.1%         3.4% 
   Invesco S&P 500 Low Volatility ETF                                           4.8%                                   2.3%                          2.5%         4.1% 
   Invesco S&P 500 GARP ETF                                                     4.0%                                  13.3%                         -8.2%         9.8% 
                                                                                                                                                          Source: LSEG 

The first thing that stands out is that eight of the nine Invesco S&P 500 factor approaches have beaten the full S&P 500 so far this year. The reason for that is "most of the factor strategies have weighting that makes them underweight to the 'Magnificent Seven' and other names that make up a lot of the S&P 500," Kalivas said, referring to a group of seven megacap tech stocks.

Since it is weighted by market capitalization, the S&P 500 is nearly 20% concentrated to its top three holding: Nvidia (NVDA), Apple (AAPL) and Microsoft (MSFT). And so far this year, Nvidia's stock has returned 8.4%, while Apple is up 0.5% and Microsoft is down 13.4%, all with dividends reinvested.

The Invesco S&P 500 Pure Growth ETF RPG is in the lead among the nine factor strategies this year, with very strong action since the S&P 500's March 30 low. The Invesco S&P 500 Momentum ETF SPMO is close behind.

Kalivas said RPG's outperformance was reflecting "big runs" for Sandisk (SNDK), Lumentum (LITE) and Ciena (CIEN). "They are second-tier [artificial-intelligence] trades, benefiting from the big-cap spending by hyperscalers," Kalivas said. He added that there has been growing concern among investors that hyperscalers - companies such as Microsoft, Amazon (AMZN) and Alphabet (GOOGL) - "are going from asset-light to asset-heavy" as they spend heavily on data centers.

So RPG provides one alternative to the S&P 500's growth-oriented approach that rewards the multiyear success of its largest components, including Nvidia and Microsoft.

SPMO provides a different alternative for growth-seeking investors, as it leans into what has been working so well, since it is "overweight now in semiconductors and capital goods" when compared with the full S&P 500, according to Kalivas. "If you look at the capital goods sector, there are some overweights for defense names, along with Caterpillar (CAT) and GE Vernova (GEV)," he said.

"The flip side is interesting" for the momentum factor, Kalivas said. "It is underweight software and software services by about 7.5%. It also does not own Amazon and it is a bit underweight banks and financial services."

Before describing the nine factor ETFs in greater detail, here they are again in the same order, with longer-term total returns. Expense ratios are shown in the rightmost column. All returns are net of expenses.

   ETF                                                  1-year return  3-year return  5-year  return  10-year return  Expense ratio 
   State Street SPDR S&P 500 ETF Trust                            39%            79%             82%            299%        0.0945% 
   Vanguard 500 Index ETF                                         40%            79%             83%            302%        0.0300% 
   Invesco S&P 500 Pure Growth ETF                                52%            79%             59%            256%        0.3500% 
   Invesco S&P 500 Quality ETF                                    32%            75%             86%            277%        0.1500% 
   Invesco S&P 500 Momentum ETF                                   50%           134%            139%            444%        0.3500% 
   Invesco S&P 500 Pure Value ETF                                 33%            57%             64%            169%        0.3500% 
   Invesco S&P 500 Equal Weight ETF                               30%            48%             50%            203%        0.2000% 
   Invesco S&P 500 Revenue ETF                                    34%            67%             82%            255%        0.3900% 
   Invesco S&P 500 High Dividend Low Volatility ETF               13%            34%             38%            105%        0.3000% 
   Invesco S&P 500 Low Volatility ETF                              7%            25%             36%            132%        0.2500% 
   Invesco S&P 500 GARP ETF                                       32%            43%             48%            292%        0.3600% 
                                                                                                                    Source: FactSet 

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04-21-26 1018ET