Momentum Investing

Momentum investors buy what has been rising and avoid what has been falling. Research shows the effect is real on average, but it can reverse violently. Here is how momentum works and how to manage it.

Winners tend to keep winning

Decades of research across many markets have found that stocks with the strongest returns over the past 6 to 12 months have tended to keep outperforming for several more months, on average. Explanations include investors underreacting to good news at first, then piling in as the trend becomes obvious.

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