In this episode, Scott Becker breaks down the flaws of momentum investing and why long-term conviction and proper asset allocation are key to investment success.
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Chapter 1: What is momentum investing and why is it criticized?
This is Scott Becker with the Becker Private Equity and Business Podcast. Today's discussion is don't be a momentum investor. So one of the stupidest things we ever hear from investment blogs, investment newsletters, trackers of the market is momentum investing. That this stock has momentum investing this momentum.
Chapter 2: How does asset allocation contribute to investment success?
The same concept is when that momentum goes the wrong direction that you sell out of that stock. And what I afford in the long run is that the most important thing, or the most important thing is your allocation of investments so you can live with the ups and downs of the market.
Chapter 3: Why is conviction important in investing?
But after the allocation of investments, the most important thing is whatever stocks you're investing in, whatever your investment theory is, it's conviction around what you're investing in.
When you have conviction around the investment, okay, I'm investing this for a specific reason, and you know why you're investing in it, then you could sort of go through the ups and downs and study the ups and downs and sort of live with them, knowing that in the long run, you're holding this for the very long term. Sort of how Warren Buffett invests.
In contrast, if you start to believe in momentum investing, which to me is a lot like timing the market, you're almost always certainly going to end up not doing very well. So the advice today is ignore momentum investing and stick to your basics. So that's the concept today. Don't have deep convictions. Get your allocation right and ignore the timing, ignore the momentum investing.
Thank you for listening to the Becker Private Equity and Business Podcast. Thank you very, very much.