Momentum investing is designed to help people invest in strong performing areas of the market and avoid weaker performing areas.
We have been using our momentum-based Upgrading approach to manage money since the 70s, but many people are just learning about momentum investing.
FundX Chief Investment Strategist Jason Browne has become the go-to momentum correspondent for Oliver Renick on the TD Ameritrade Network. In his August 3, 2018 interview, Jason shared some of what he’s learned from following a momentum strategy for so many years. He also gave his take on interest rates, the technology trend and financial stocks.
Click here to watch Jason’s full appearance. Find his momentum investing tips below.
3 Momentum Investing Tips
1. Focus on what’s doing well now (not what you think might do well later)
Momentum investing leads you to invest in what’s done well lately and and avoid trying to predict what the future holds. “One thing I’ve learned is that you don’t want to fight these things,” Jason explained. “If tech is what’s working then aligning with that tends to be a lot better than trying to guess what the next trend is gong to be.”
2. Accept that it won’t always be perfect (and it doesn’t have to be)
“Another thing I’ve learned from following a momentum approach is that it’s not perfect,” Jason said. Some trends are short lived. A sector may come into favor and then reverse course soon after. Jason pointed to the financial sector, which hasn’t been able sustain to its good performance in 2018.
3. Know when it’s time to move on (and take action)
If a fund doesn’t continue to do well, you’ll be led to move on to another fund that has stronger momentum.“The great thing about momentum is that if something stops working, there’s an automated sell discipline to help get you out,” Jason said.