investing guide

Momentum Investing

If you are more of a go with the flow kind of person, then momentum investing may be for you.

Momentum investors buy stocks that are already on their way up with the belief that the stock will continue to go higher and higher. They really do not care about the fundamentals of a company as long as the price continues to go higher.

These type of investors will tend to use technical analysis to predict if a stock will continue to go higher. The problem with this method is you just simply can not know with 100% certainty when the run may be over.

This was the case in the late 1990's when people could buy high-flying technology stocks at any price, and they would continue to go higher and higher. Unfortunately, all good things must come to an end, and as we all know the technology stocks came crashing down hard.

I have never been a big fan of following the crowd, or in the method of chasing stocks higher. You will probably have poor success, if you are the type of investor who tries to chase what others have already started.