Momentum Fund

AAA

DEFINITION of 'Momentum Fund'

Investment funds that invest in companies based on current trends in such things as earnings or price movement. The portfolio manager will look for companies that have been trending in a certain direction (e.g. a series of extremely positive earnings releases or upward price momentum in the short term). The manager will then take positions in the same direction as the trend and attempt to ride the wave and sell once it has peaked.

These funds are also known as "momo funds".

INVESTOPEDIA EXPLAINS 'Momentum Fund'

This type of fund, which was very popular in the late 1990s, will often make investments in companies that have grown their earnings or sales at a rapid pace, looking for further increases in the near future. Momentum funds also invest based on technical indicators such as price breakouts from historic levels. The investment premise of this type of fund has often been questioned by the more long-term, value oriented segments of the market, as it is considered difficult to predict short-term price movement.

RELATED TERMS
  1. Market Momentum

    A measure of overall market sentiment, calculated as the change ...
  2. Earnings

    The amount of profit that a company produces during a specific ...
  3. Value Investing

    The strategy of selecting stocks that trade for less than their ...
  4. Fund Manager

    The person(s) resposible for implementing a fund's investing ...
  5. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  6. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
Related Articles
  1. Momentum Trading With Discipline
    Trading Strategies

    Momentum Trading With Discipline

  2. Mutual Fund Basics Tutorial
    Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

  3. ChartAdvsor for October 24, 2014
    Chart Advisor

    ChartAdvsor for October 24, 2014

  4. How Bitcoin Casinos Work
    Investing Basics

    How Bitcoin Casinos Work

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center