How does an investor create an atmosphere where others will want to buy and what are the reasons against such momentous enthusiasm? Investors don’t so much create momentum in the stock market as they react to it when it happens. Mostly the momentous moment arrives due to diligent attention to detail and the right moves already made.
And you, with the wise choices already made, don’t succumb to the moment, but you methodically do what you believe to be in your best interest. That’s the healthy way of reacting to present hot market trends, but that has its drawbacks when indicators either aren’t recognized or aren’t heeded. Too, in the best interest of investors, these built in indicators that give hints as to the wisdom of such and such a choice, must be observed.
Whether to follow the momentum, the present buying trends, too closely or to be cautious is the question being asked here: Okay, you’ve made some impressive sales, and others in the vicinity are cheering you on. Do you allow this throw you off course, or do you take it all in stride? You know the market and easily things can go in negative directions, and not to your liking. In other words, you apply common sense to the ongoing hype and treat the day, or the time, as just another day in the fickle market place. You follow your own instincts. You don’t dilly dally around but sell what can immediately get you cash, and in those areas where in doubt, you tarry a bit.
As already said you put your money in those portfolio items that work for you now. This is the day you’ve been waiting for and you don’t allow it to deter you. You don’t cave in now to a queasy stomach or to negative thoughts that things can turn the other way, you go for it. If you’re sure that is and if you’re using money you can afford to lose.
If you’re only an amateur you listen to your broker or your investment guide and do not do anything foolish. Understand that when you make money, they make money and if they say go with the momentum, then do so. Don’t be hesitant. Instead of rapid gain, they may advise buy and hold. That will stymie any get rich quick schemes that all too often is the downfall of over eager investors.
Consistency always works best. When you hold rather than buy and sell quickly, you save on commission fees. These activities also results in a good dividends even if they don’t immediately make you rich. The stock market has its own vocabulary and words that they use often take slight detours from the works dictionary meaning, but they don’t stray far.
Momentum investing as explained by Investopedia is an investment strategy that takes advantage of the present trend while believing that it will continue. They continue for a while but eventually they run out of steam, or energy. Isn’t that what happened when the buying frenzy infected too many investors and high flyers plummeted? Were the indicators, small disruptions in the trend that signaled something was not right, ignored?
Economists know now that is what happened. And they also know that reality is sometimes hard to live with, but when it’s the only choice available, who’s to blame except the messenger?