momentum

Definition of the term "momentum" in investing.

Momentum is a metric describing an upward trend in the value of an asset over a given length of time. Investors who make buy or sell decisions based primarily on this metric are considered “momentum investors.”

Momentum as an indicator

Many long-term investors use momentum to inform their buy and sell decisions, even if it’s not the primary metric guiding their strategy.

Because it is so clear-cut, momentum can easily be employed as a trigger with simple rules. For example:

Graphic explaining the user of a momentum trigger in stock market investing.

Momentum investors use rules like these to govern their decision-making.

What is good momentum?

There is no industry-wide threshold for momentum; each investor must determine an appropriate level for the target portfolio.

Likewise, the time interval to determine momentum is up to each investor. Momentum is used most often by long-term investors (those who hold positions for many months at a time, at least), and momentum is calculated over the last calendar year.

Momentum may also fluctuate with market conditions; in a bear market, the minimum % growth that constitutes momentum may be lower than in more favorable market conditions.

How Finiac defines momentum

Assets in Finiac are defined as having momentum if they have demonstrated 10% growth over the last year.

When you filter a portfolio or collection to show only positions with momentum, you’re asking to see only those components whose value has grown at least 10% in the previous 1 year.