27 May, 2021

Momentum investing means you’re usually behind the curve

In the short run people might make out. But you’ll never know if you’re getting in when the momentum is subsiding or when it’s just starting to take off. It only works in the long term if the businesses use this opportunity to turn themselves around. If they continue on the same path of being unprofitable and having a poor business models it won’t save them or their investors.

Millions of individual investors stampeded into the market last year, enticed by zero-commission brokerages and easy-to-use investing apps, and their interest helped fuel the post-pandemic rally. That, and the fervor with which many small investors have piled into market winners, have potentially set the stage for severe selloffs if spooked investors flee hot stocks en masse.

That is in part because they are riding one of the most powerful forces in markets over the past year: momentum investing, or buying assets simply because the price is rising. 

Wall Street Journal
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About : Kevin Bae

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