Invest if you have long horizon and stomach for volatility

In a rising stock market, investors seek opportunities in upward-trending stocks. Momentum funds cater to this need by systematically identifying and capitalising on prevailing market trends.

- SARBAJEET K SEN

In a rising stock market, investors seek opportunities in upward-trending stocks. Momentum funds cater to this need by systematically identifying and capitalising on prevailing market trends. With growing interest, fund houses have begun to offer both active and passive momentum-focused schemes. A recent entrant is the new fund offer (NFO) of Motilal Oswal Active Momentum Fund.

"Momentum factor investing refers to the strategy of building a portfolio using stocks that have done well recently. It looks to benefit from the notion of winning stocks continuing to perform well in the near future," says Sirshendu Basu, head-products, Bandhan Asset Management Company (AMC).

How momentum investing works Momentum funds follow a thematic approach, buying stocks in an upward trend and selling when the trend reverses.