Momentum can be a fickle friend. While tomes of academic research provide strong evidence that momentum strategies (buying shares that have been rising strongly in hope of more of the same) outperform over the long term, there are frequently big bumps along the road. What’s more, the spectral nature of 'momentum' can make it a tricky strategy for investors to keep faith with during bad times – chasing momentum is ultimately chasing market sentiment, as reflected in share price action, whereas most other investment strategies tend to offer the comfort of being anchored to an analysis of company fundamentals.
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