Lead-Lag Live: Dual Momentum Investing
There are a variety of ways to think about how to invest in financial markets. One somewhat overlooked strategy is based on momentum. Simply put, the idea is to buy stocks that are going up, on the logic that they have been going up.
This theory has been at odds with other investment theories, such as the efficient market theory. However, those who use the strategy and use proper risk management have been able to use it successfully.
In today’s markets, it may seem like a strategy that may not play out well, thanks to the recent stock volatility.
However, the strategy can be applied both on individual stocks but also sectors or international markets as well. Those who use a momentum strategy with a diversified approach can obtain excellent results.
To follow momentum investing, one can simply look at which asset classes are performing well, and allocating more to those positions. More advanced tools can be incorporated along with backtesting to further refine the results.
Investors may want to use this strategy to find sectors that have been performing well recently. That can help offset some of the losses from the overall stock market in the past year. Following the right risk management, this strategy can be used to beat a buy-and-hold investing strategy.