Introducing momentum investing
is an investment strategy that focuses on investing in the best performing shares of the previous month and shorting the previous month’s worst performers.
Every month, you repeat the process.
Professors Dimson and Marsh researched this strategy on the Numis Smaller Companies Index. With the exception of a few hiccups, over the past 60 years, an investment in momentum stocks would have done a staggering 13,397 times better than the index, David Thornton in Penny Sleuth
Of course, doing this every month is practically impossible for the average investor. And the trading costs would be huge buying and selling so many stocks.
But what this strategy illustrates is that if a share has performed well in the recent past, chances are it will continue to. And that’s why the old stock market adage the trend is your friend
Why momentum investing is successful
If you believe efficient market hypothesis, all news (good and bad) about a share should reflect immediately. But the truth is, it can take time.
This is even more so with penny stocks and smaller companies. And news itself can move in trends. For instance, a company might not want to put out bullish forecasts in case they don’t achieve them.
Holding onto your winning stocks is part of this investment strategy. And make sure you’re always watching for stocks that are doing well. They could be the next additions to your momentum portfolio.
So there you have it, a winning investment strategy to consider.
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Achieve financial independence one income stream at a time
I’m a big believer in financial independence. I don’t want to be dependent on anyone or any institution to take care of my family or me in the future. Having one source of income is very scary to me. If that stream of cash dries up – for whatever reason – I want to know that I have other cash streams I can tap into.
When most people think of extra income they think of athletes and actors who get endorsement and advertising deals.
But the truth is that anyone can create extra income streams.
You don’t need well-placed connections. You don’t even need to be especially smart.
All you need is the willingness to invest a little extra time in learning about your options – and then invest a little more time and some money pursuing them.
That’s why I started this publication – Because I want to show you how to create multiple income streams for yourself.