My version of momentum investing
The premier market anomaly is momentum. Stocks with low returns over the past year tend to have low returns for the next few months, and stocks with high past returns tend to have high future returns
Eugene Fama & Kenneth French
When the fathers of modern portfolio theory and efficient market hypothesis call “momentum” as a market anomaly, you sit up and notice. You are curious and as you read more , you realize that this anomaly is actually a game changer.
Momentum as a phenomenon existed since the beginning of mankind, only that we discovered its influence in every sphere gradually.
Isaac Newton and his laws of motion introduced us to this concept:
An object in motion tends to stay in motion. What is at rest will remain at rest.
1) About Bluechip Momentum
Bluechip Momentum Investing is a proprietary trading strategy based on momentum investing which I employ on a part of my portfolio.
What is Bluechip momentum investing?
A single strategy harnessing the combined power of three distinct investing strategies to generate investing ideas for short to medium term horizon.
A blueprint for your short term investing – Answers to key questions: Where to invest in ? When to invest ? and How much to invest?
2) Why Quality investing?
The momentum factor is applied on a basket of high quality stocks based on proprietary criteria to ensure the building blocks of the portfolio are inherently designed to deliver outperformance.
Multiple studies validate this.
GMO Study: Quality outperforms Junk
Schroders study : Quality delivers + 4% annualized excess return
Double Bonanza : Lower Risk & Higher Return
Persistence of Quality: Quality business likely to remain quality
Quality – Predictable & Stable Earnings
3) Why Momentum investing?
Numerous Studies have shown momentum investing outperforms
Another study, similar result: Outperformance of momentum strategy
4) Why Focus investing ?
Concentrated positions on high conviction ideas builds wealth and diversification is meaningless beyond a point.
5) Implementing Bluechip Momentum
Multiple small wins
Rule based entry and exit
High Risk Strategy
Possibility of higher returns comes with Higher risk & higher trading costs
In short, Bluechip momentum strategy tries to harness the power of three distinctly powerful strategies to generate ideas for accelerated profits.
Additional reading : Into the world of momentum investing