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. Trend

    The general direction of a market or of the price of an asset. ...
  2. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  3. Value Investing

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

    An investment vehicle that is made up of a pool of funds collected ...
  5. Fund Manager

    The person(s) resposible for implementing a fund's investing ...
  6. Earnings

    The amount of profit that a company produces during a specific ...
Related Articles
  1. Trading Strategies

    Momentum Trading With Discipline

    This type of strategy demands controlled decision-making, requiring a continual refinement of entry and exit techniques.
  2. Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

    Learn about the basics - and the pitfalls - of investing in mutual funds.
  3. Mutual Funds & ETFs

    The Top 3 ETFs For Investing in Commodities

    Explore diversifying an investment portfolio through investing in commodities ETFs, and get information on some of the best commodity funds.
  4. Mutual Funds & ETFs

    The Top 3 ETFs For Investing in Copper

    Learn about some of the best available ETFs, both commodity-based and stock-based, that investors can use to gain exposure to the copper market.
  5. Mutual Funds & ETFs

    The Top 3 ETFs For Investing in Sugar

    Discover information about the exchange-traded funds, or ETFs, that offer investors exposure to the basic agricultural commodity, sugar.
  6. Mutual Funds & ETFs

    Top ETFs for Investing in Coffee

    Learn about the market for coffee, one of the largest agricultural markets, and two ETFs that investors can use to obtain exposure to the coffee market.
  7. Credit & Loans

    The Lurking Dangers of Student Loans

    Student loans are popular, but they present many dangers.
  8. Mutual Funds & ETFs

    ETF Analysis: Powershares DB US Dollar Bullish Fund

    Explore information and detailed analysis of two popular currency exchange-traded funds, the PowerShares DB U.S. Dollar Bullish and Bearish Index Funds.
  9. Mutual Funds & ETFs

    The Top 3 ETFs For Investing in Hong Kong

    Discover information and analysis of three exchange traded funds that investors can use to access potential profits from investing in Hong Kong.
  10. Mutual Funds & ETFs

    The Top 3 ETFs For Investing in Canada

    Learn specific information about three of the most popular and best performing ETFs that offer exposure to Canadian equity markets for U.S. investors.
RELATED FAQS
  1. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  2. How are American Depository Receipts (ADRs) exchanged?

    American depositary receipts (ADRs) are bought and sold on regular U.S. stock exchanges, either in the over-the-counter market ... Read Full Answer >>
  3. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  4. How do you know where on the oscillator you should make a purchase or sale?

    Common oscillator readings to consider making a buy or sale are below 20 or above 80, respectively. More aggressive investors ... Read Full Answer >>
  5. What action is the SEC likely to take on 12b-1 fees?

    The Securities and Exchange Commission (SEC) may take action to impose greater regulation on how 12b-1 fees are used, or ... Read Full Answer >>
  6. What is considered a reasonable 12b-1 fee?

    A reasonable 12b-1 fee is generally considered to be 0.25% of the assets of the mutual fund. The maximum amount allowed for ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Nanny Tax

    A federal tax that must be paid by people who hire household help (a babysitter, maid, gardener, etc.) and pay them a total ...
  2. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  3. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  4. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  5. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  6. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!