The evidence is strong that momentum is a “real” market effect. It has been found in stocks, bonds, currencies, commodities, etc…every place people have looked.

Of course, the more popular momentum stratgies become, the less well they will work. So it’s realistic to expect lower returns from momentum in the future than in the past.

It’s such a pleasure to have a civil disagreement…..now if only the politicians could do that…maybe we’d get somewhere.

Great post. Thanks again!

And thanks again for letting me write a guest post.

I’m going to send you my book. It goes into this subject in great detail.

I look at a blended performance which is proprietary and I review it on a periodic basis which is also proprietary. I don’t bet on continued performance – I track it and update my holdings on a fixed schedule based on the current rankings.

I’m not able to discuss performance even in general terms on this blog….I’m not trying to sell my services here and don’t want to misunderstood.

Hope that helps friend.

Right, so that’s the bet. But my question is why would you make that bet? What’s the reason other than past performance?

Also, do you choose funds that have outperformed over the last 3 months? 6 months? 12 months?

And how long do you bet on their continued outperformance?

And why would you choose those specific periods? Again, is there any reason other than data that “that’s what’s worked in the past” ?

“What reason is there to think that fund managers will exhibit above-average returns simply because they’ve done so over the very recent past?”

As Max pointed out, because they happen to have found the correct mix. It’s not manager dependent. The link I provided shows one approach that does this successfully – though not perfectly.

“Second question, simply because I’m curious: Would you (or do you) engage in such a strategy with clients’ money?”

Because the SEC is really picky about what an RIA writes regarding performance, I have to be really careful here. Forgive me for being vague but I can tell you that I do not manage client assets using “buy and hold”. I would be happy to go into more detail privately if you would like.

Also, the evidence supports the premise – as I point out in the post.

I certainly agree. I do think it’s really important to use objective data and a system that has a proven track record to do this however.

Do you use a systematic approach?

There are certainly many ways to approach investing.