Momentum investing is a strategy that involves buying stocks that have performed well recently, with the expectation that their upward momentum will continue in the near future. This strategy is based on the belief that trends tend to persist, and that stocks that have recently performed well are more likely to continue performing well.
Momentum investors typically look for stocks that have demonstrated strong relative strength, which is a measure of a stock’s performance compared to the overall market or a benchmark index. They may also use technical analysis and charting tools to identify patterns and trends that indicate upward momentum.
Momentum investing can be a useful strategy for investors who are seeking short-term gains and are willing to take on higher levels of risk. However, it is important to note that momentum stocks can be volatile and may be subject to sudden reversals if market conditions change. As with any investment strategy, investors should carefully consider their financial goals, risk tolerance, and investment horizon before deciding whether to pursue a momentum investing strategy. Additionally, diversification is an important principle of any investment strategy, as it can help to spread risk and reduce exposure to any one stock or sector
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