Strategy

Momentum

Ride the stocks that have recently performed strongly.

Medium-termActiveRichard Driehaus

Core idea

Momentum strategies build on the observation that stocks with strong recent price performance tend to keep outperforming in the short to medium term.

How it works

Stocks are ranked by relative strength (e.g. 6–12 month price change), the strongest are bought, and the portfolio is rotated regularly. Trends are ridden until they break.

Pros

Clear rule-based signals are possible
Can work very well in trending markets

Cons

High turnover → costs and taxes
Prone to whipsaws in sideways or turning markets

Known for

Richard Driehaus

For educational and informational purposes — not investment advice, not a recommendation to follow this strategy.