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Sean HymanSean Hyman
Keymaster
Post count: 5579

Near bubble tops, you could still lose massive gains with only a 5-10 year horizon. 5-10 year horizons only matter early in a bull market or investing in the former downtrend. It’s more about buying at the right valuations and capturing unusual prices by averaging down than in length of holding time.

Momentum trading has to have an uptrend. We do not. Momentum trading has most of its gains on the tail end when things are the riskiest. Value investing’s biggest % gains are made because we bought more when prices were lower and valuations were lower (lower risks) and those gains are realized when we exit. But the outsized gains, for value investors, come because of what we do on the front-end.

Value investing is more about the front-end and low risk. Momentum trading is about “how long to hold onto it or add to it” on the back end, when risks are at their highest. We add money when the long-term risks are the lowest, not the highest. Two vastly different philosophies.

The beauty of value investing is that you can get outsized gains without outsized risks. That can’t happen with momentum trading.