Riding the Wave: Understanding Momentum Investing for Long-Term Growth

MOMENTUM DOESN'T just belong to athletes. In the world of investing, it is a force of its own. Think of a fast-moving train. The more ground it covers, the more power it gains.

- BY AKHILESHWAR JHA

That is momentum in action. In investing, momentum refers to the tendency of winning stocks to keep winning, and laggards to continue lagging at least for a while.

What it is

Momentum investing is the art and science of spotting stocks that are already doing well and are likely to continue their upward journey. But it's more than just chasing high-flyers. It's a disciplined strategy that blends trend-following with fundamental insight.

In simple terms, it means owning stocks that are rising either due to price trends, earnings growth, or positive analyst upgrades. One needs to step away too when that momentum fades. There's no emotion, no attachment, just a data-backed, trend-driven discipline.

This strategy operates on a simple belief: "Recent winners tend to stay winners for a while."

Why it works