October 6, 2024

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Be Wary of Momentum Investing Strategies

Be Wary of Momentum Investing Strategies

In basic physics, the principle of momentum is intuitive: Give a billiard ball a tap, and the ball will keep rolling in the same direction from one second to the next. 

It’s tempting to apply the same logic to stocks. After all, study after study has found that, historically, stocks with prices that rose or fell over a few hours or months were disproportionately likely to keep heading in the same direction for at least the next few minutes (if the trend was marked over hours) or weeks (if the trend was established over recent months). 


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