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This Investing Trend Is Your Friend—Until It Isn’t
"Momentum makes less sense to a thoughtful, long-term investor. It also seems reckless. Essentially, you buy more of what just went up. Many successful strategies require both analytical chops and discipline. Following the crowd is already human nature and is a feature of bubbles."
"But it is hard to argue with long-term results: A momentum index maintained by S&P Dow Jones Indices since the summer of 1994 would have turned a $1,000 investment into $28,500 by last summer—71% more than by just owning the S&P 500. It also beat value and high-dividend baskets handily while being less-volatile."
"That is especially relevant at the moment because tariffs could dent global economic growth while also raising domestic prices.During low growth and rising inflation periods momentum has had annualized returns of negative 13.33% and lots of volatility too, according to a 2024 study by S&P. The risk-adjusted return for a high-dividend basket of stocks, by contrast, has been basically flat under the same conditions."
""Momentum makes less sense to a thoughtful, long-term investor."
MMM...this investor has been using momo successfully since 2000 because it works if you know how to do that, and it's not that easy. The other choice is to have some diversification LT with minimal trades, which is pretty good for most. Something that is not easy doesn't mean it's undoable. You must have a system that works and keep tweaking it. It doesn't mean it's perfect; just better is enough to get better results. If I had stocks, I would have a higher % in Value, Europe, China, and gold.
If momo doesn't work, how come US LC were great during 1995-2000 + 2010-2024 while Value, SC, and international were better during 2000-10. Each one lasted for years. Generally, when US LC do well, it's difficult to beat them per risk-adjusted performance. When they are not, it takes more effort to find other categories and I would advise being more diversified.
Investors who don't believe it, don't practice it, and don't trade it can't be good traders.
Please share if you are aware of any active momentum funds (ETFs or mutual funds) that do not follow a pre-set schedule for rebalancing / reconstitution?
All the momentum funds I know follow a pre-set schedule and I had wanted the ones which do not.
"If momo doesn't work, how come US LC were great during 1995-2000 + 2010-2024 while Value, SC, and international were better during 2000-10."
The author does state that an S&P momentum index beat the S&P 500 and a basket of value stocks. He also suggests that it may not be the optimal time to use a momentum strategy due to near-term economic headwinds. I don't know whether this suggestion will be proven correct.
I never used momentum indexes; I only used typical funds but looked at the best risk/reward ones and kept changing according to uptrends, and several parameters. How to do that? It's the $64K. I developed my system for years, just as I developed my timing one for retirement. None is mechanical. See (link).
I have posted for over 15 years on several boards, and I can say that there are maybe 5-7 people who do it well. The rest don't believe it, don't want to put in the effort, or don't care.
"I never used momentum indexes; I only used typical funds but looked at the best risk/reward ones and kept changing according to uptrends, and several parameters."
This may be surprising but the article isn't about you or your "system." It's about momentum investing in general. You posted messages very similar to the one from 9:40 PM many times. There is no need to post the same messages ad nauseum. Thank you for your consideration!
I find FD1000 a consistent messenger for thoughtful appraisal of the markets vageries. He is a valid poster unlike contentious foul mouthed JD who in one sentence uses vulgar non illuminating vindictive: "Piss off, B S, jackass." totally rude this churl must be proscribed from posting
"I never used momentum indexes; I only used typical funds but looked at the best risk/reward ones and kept changing according to uptrends, and several parameters."
This may be surprising but the article isn't about you or your "system." It's about momentum investing in general. You posted messages very similar to the one from 9:40 PM many times. There is no need to post the same messages ad nauseum. Thank you for your consideration!
I can post whatever I want, just as you post daily about tariffs ad nauseum. You may learn something if you pay attention because I have done it. BTW, why do you post the same thread on 2 different sites?
I have to give credit where credit is due. You are the most prolific Thread Hijacker I have ever encountered! Congratulations, one more entry can be added to your logbook. I hope this recent accomplishment brings you great satisfaction.
Comments
MMM...this investor has been using momo successfully since 2000 because it works if you know how to do that, and it's not that easy.
The other choice is to have some diversification LT with minimal trades, which is pretty good for most.
Something that is not easy doesn't mean it's undoable. You must have a system that works and keep tweaking it. It doesn't mean it's perfect; just better is enough to get better results.
If I had stocks, I would have a higher % in Value, Europe, China, and gold.
If momo doesn't work, how come US LC were great during 1995-2000 + 2010-2024 while Value, SC, and international were better during 2000-10. Each one lasted for years.
Generally, when US LC do well, it's difficult to beat them per risk-adjusted performance. When they are not, it takes more effort to find other categories and I would advise being more diversified.
Investors who don't believe it, don't practice it, and don't trade it can't be good traders.
All the momentum funds I know follow a pre-set schedule and I had wanted the ones which do not.
while Value, SC, and international were better during 2000-10."
The author does state that an S&P momentum index beat the S&P 500 and a basket of value stocks.
He also suggests that it may not be the optimal time to use a momentum strategy
due to near-term economic headwinds. I don't know whether this suggestion will be proven correct.
How to do that? It's the $64K. I developed my system for years, just as I developed my timing one for retirement. None is mechanical. See (link).
I have posted for over 15 years on several boards, and I can say that there are maybe 5-7 people who do it well. The rest don't believe it, don't want to put in the effort, or don't care.
@FD1000,
This may be surprising but the article isn't about you or your "system."
It's about momentum investing in general.
You posted messages very similar to the one from 9:40 PM many times.
There is no need to post the same messages ad nauseum.
Thank you for your consideration!
BTW, why do you post the same thread on 2 different sites?
I have to give credit where credit is due.
You are the most prolific Thread Hijacker I have ever encountered!
Congratulations, one more entry can be added to your logbook.
I hope this recent accomplishment brings you great satisfaction.