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Isaac Newton and Momentum Investing

The article from News18 discusses the concept of momentum investing through the lens of Sir Isaac Newton's laws of motion. It explains how momentum investing, a strategy where investors buy stocks that have had high returns over the past three to twelve months and sell those with poor returns, can be likened to Newton's first law of motion: an object in motion stays in motion unless acted upon by an external force. The article delves into how this strategy capitalizes on the tendency of stocks to continue moving in the same direction due to market psychology, where investors tend to underreact to new information initially and then overreact. It also touches on the risks involved, such as the potential for momentum crashes when the market dynamics shift abruptly. The piece concludes by suggesting that while momentum investing can be profitable, it requires careful management of entry and exit points to mitigate risks, drawing a parallel to how external forces can change the trajectory of a moving object in physics.

Read the Full CNN-News18 Article at [ https://www.news18.com/business/markets/isaac-newton-and-momentum-investing-9133711.html ]