“An Insult To My Intelligence”

Joachim Klement, CFA articulates his past opposition to momentum investing:

I used to consider momentum investing an insult to my intelligence. After all, why should prices go up just because they have gone up in the past?

Maybe this is what happens to you if you are bullied once too often in high school, but I have always taken the most pride in my non-consensus views.

Momentum investing is the exact opposite. You invest in the popular stocks of the day hoping that the views of the general investing herd are right. More appealing to me are value and contrarian investing because they seem so much more “intelligent.” And in both of these investing traditions, success originates from betting against “the wisdom of the crowds.”

It is refreshing to hear someone actually admit that wanting to seem intelligent is a reason they at one time avoided momentum investing.  Truth be told, this may be one of the major reasons that people are slow to embrace momentum for part of their investments.

Pragmatists tend to get over that hurdle much more quickly and simply want to employ the most effective investment strategies that they can find.

The relative strength strategy is NOT a guarantee.  There may be times where all investments and strategies are unfavorable and depreciate in value.

4 Responses to “An Insult To My Intelligence”

  1. Chris Rowe says:

    What’s interesting is this guy calls those who are in winning stocks “the herd”.

    As if the herd is what moves prices (as opposed to a hand full of large investors).

    Just because something is breaking out, or broke out even a while ago, doesn’t mean the johnny come lately herd has gotten in.

    Chris Rowe
    Rowe Wealth Management

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