110 - How I am incorporating Momentum into my Investing Process

Mental Models discussed in this podcast: Momentum Inertia Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience.  Follow me on Twitter and YouTube Twitter Handle: @TreyHenninger YouTube Channel: DIY Investing Support the Podcast on Patreon This is a podcast supported by listeners like you. If you’d like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at DIYInvesting.org/Patron. Show Outline The full show notes for this episode are available at https://www.diyinvesting.org/Episode110 Two Types of Momentum: Price and Busines Fundamentals Business fundamental momentum is the most important, but price momentum can be helpful.  How to use Price Momentum in your investing process Downtrend or Uptrend or Consolidation Period Price momentum isn't a deal-breaker on the purchase decision. However, you should understand where the momentum is if any. Some of the best times to buy are during consolidation periods. (Months or years of relatively flat stock price).  I learned this from ElementaryValue.com (David Flood) Business Momentum applied to Value Investing Is the business improving or deteriorating? I no longer want to buy deteriorating businesses. They may surprise to the downside. It is psychologically harder to hold bad businesses or declining businesses. Improving businesses are likely to surprise to the upside. Summary: Both momentum investing and value investing provide excess returns. This episode outlines how I plan to profit from both forms in my investing process. Specifically, price and business momentum will be added to value investing. The use of price momentum should limit my losses when mistakes are made. Meanwhile, by analyzing business momentum I am likely to reduce the probability of making mistakes.