Value vs momentum: Which is the better investment strategy?
Business Desk | November 6, 2024
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It focuses on identifying stocks that are trading below their intrinsic value. Investors seek bargains, believing that the market will eventually recognise the company’s worth, leading to price appreciation.
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It is based on the idea that stocks that have performed well in the recent past are likely to continue doing so.
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Value investors rely heavily on fundamental analysis, looking at earnings, revenue, debt levels, while Momentum investing, however, leans more towards technical indicators.
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Value investors typically adopt a long-term approach, holding stocks for several years.
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Momentum investors, on the other hand, usually look for shorter-term gains, capitalising on current market trends. They’re quicker to buy and sell based on market dynamics, aiming to benefit from price shifts.
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Value investing tends to outperform in market downturns, as undervalued stocks are seen as safer. Momentum strategies often excel during strong bull markets, as trends gain steam.
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Value investing carries the risk that a stock may remain undervalued or take time to realise its potential. Momentum investing risks arise from sudden reversals, where a stock’s trend might abruptly change direction.
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Value investing may suit conservative investors who are willing to wait for returns, while momentum investing can attract aggressive investors looking to benefit from market trends.
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Experts often recommend a balanced portfolio approach, combining both value and momentum investments.
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Moneycontrol advises users to check with certified experts before taking any investment decisions.
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