Thursday, May 5, 2011

Good Point About Value vs Momentum

From the comments:

The value "cult" proposes buying $1 of value for less than $1. If you are in fact buying $1 of value, you have made a successful investment in the moment of buying.

The momentum "school" proposes buying $1 of value for more than $1, and then selling that $1 of value for >$1+n to someone else. Your expected profit isn't "locked in" in the buying like it is for the value investor but rather is hoped for in the selling, a proposition which is decidedly more uncertain because you've given yourself no room for error from the get-go by purposefully paying more for something than it's actually worth.

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