Despite numerous reasons why investors might expect otherwise, 2026 appears to be off to an excellent start across many parts of the market. As evidenced by strong earnings growth often topping analyst expectations, hearty revenue growth, and continued elevation in profit margins, a market buoyed by AI investment has thrived.
While not all portions of the market have flourished, the boom goes beyond just the information technology sector—financials stocks have also done quite well overall, for instance. For investors, there may be motivation to try to capitalize on broad strength with diversified exchange-traded funds (ETFs). Ideally, these investments might help capture some of the market's overall growth while simultaneously shielding investors from risks specific to any individual stock. One fund for overall momentum, one based on price-to-earnings (P/E) ratio, and one fund focused on momentum quality and consistency may be a place to start.
A Momentum-Focused Fund With Market-Beating Returns
The iShares MSCI USA Momentum Factor ETF (BATS: MTUM) is one of the low-cost factor-based ETFs that, as a group, have gained significant popularity in recent years. This fund targets a group of large-cap U.S. equities that have a recent history of share price momentum.
Its underlying index helps to ensure some diversification across sectors, and weighting within each sector keeps the overall portfolio from becoming too narrowly focused.
The result is a fund with about half of its portfolio dedicated to technology stocks, with none of its nearly 130 positions accounting for more than 6.5% of invested assets. The fund is robust, with close to $26 billion in assets under management and a healthy one-month average trading volume of around 1.5 million.
In terms of performance, the momentum play continues to be strong: MTUM has returned around 25% year-to-date (YTD) and 35% in the last 12 months. A modest dividend yield of 0.7% might help to sweeten the deal further. Overall, MTUM is quite a strong offering for a relatively low fee of 0.15% per year.
Unique CAPE-Based Value Fund With a Dividend Add-On
Economist Robert Shiller's CAPE ratio remains a highly popular valuation metric, and the Shiller CAPE U.S. Equities ETF (NYSEARCA: CAPE) translates this approach into a diversified fund. CAPE seeks to focus on large-cap U.S. equities from the four cheapest sectors as determined by the CAPE ratio, with a secondary strategy involving momentum in order to avoid the impact of possible value traps.
As of April 30, 2026, CAPE held information technology stocks, real estate firms, health care names, and consumer discretionary companies. However, it is rebalanced monthly to ensure timeliness based on market trends. The strategy is unique but has had mixed results recently: CAPE is trading roughly flat YTD. This does go to show that, just because a sector is potentially undervalued, it does not guarantee that stocks within that sector will immediately generate returns.
For investors, CAPE may appeal most as a buy-and-hold ETF. Partially, this is due to its relatively modest asset base of just over a quarter of a billion dollars and its similarly small trading volume. At the same time, the fund's expense ratio is fairly high at 0.65%, which is offset by a 1.3% dividend yield.
Quality of Momentum Is Key for This Specialized Active Fund
The Alpha Architect U.S. Quantitative Momentum ETF (NASDAQ: QMOM) is another momentum-based fund. In this case, QMOM factors in one-year returns and, more specifically, a history of small, continuous daily upward price movements (rather than a smaller number of spikes, for example). This fund also focuses on smaller stocks, expecting that these firms will receive less analyst coverage and may therefore offer more mispricing opportunities to capitalize on.
QMOM is an actively managed fund, but its expense ratio of 0.28% would not necessarily give that fact away. All told, the ETF holds just over 50 different U.S. equity positions, all of which are roughly equally weighted (no single name represents more than 2.5% of the portfolio). Its largest holdings include Dell Technologies Inc. (NYSE: DELL) and TD SYNNEX Corp. (NYSE: SNX), although the fund does not completely lean on tech names.
QMOM's approach has generally been successful: the fund has returned close to 17% YTD and offers an appealing dividend yield of about 1.2%. While not massively popular, its asset base is approaching half a billion dollars. This fund may therefore appeal to investors seeking a momentum play slightly off the beaten path—and one that may be uniquely responsive to strong, sustained earnings performance among companies.
The article "Build On a Strong Earnings Season With These 3 ETFs" first appeared on MarketBeat.
