Published on 27 Mar 2024 on Insider Monkey via Yahoo Finance
In this article, we discuss 10 best momentum ETFs to buy. If you want to skip our discussion on momentum investing and the stock market outlook, head over to 5 Best Momentum ETFs To Buy.
What is Momentum Investing?
Momentum investing refers to a strategy that increases portfolio exposure to stocks with robust performance while lowering exposure to those with weaker performance. This approach revolves around buying stocks with upward-trending prices and it has been historically backed by economic theory and empirical evidence. Typically targeting a 12-month timeframe, momentum strategies consistently record positive returns and add diversity to investment portfolios. According to BlackRock, the concept of momentum can be best grasped through behavioral finance theories. It stems from investors' behavioral tendencies, where individual actions reinforce market trends. Moreover, momentum rewards may offset the risk of short-term underperformance that some investors avoid. Despite occasional short-term setbacks, like those seen in 2001, 2009, and 2023, momentum consistently offers lasting benefits. Both risk-based and behavioral-based explanations play a role in its persistence, supporting the belief that momentum will remain a viable strategy in the future.