by Michael Tarsala
Buy stocks that perform the best and sell ones that perform the worst.
That strategy worked to near-perfection in the tech boom years.
And it still works — as long as you use them in periods of low volatility, says Mark Hulbert, editor of the Hulbert Financial Digest.
Following that logic, going to cash in periods when the market sells off hard and volatility spikes is a smart move.
And it should work NOW, he says, given that the VIX is at low-to-moderate levels.
Momentum investing is not a favorite among Covestor model managers; there are only two that specialize in it.
One is Robert Freedland, manager of the Sustained Momentum model. He has 10 stocks in the investment model right now, but keeps a watch list of 42 additional stocks that meet his quality checklist. He subs in stocks from the backup list based on their relative performance.
You can learn more about Freedland and his strategy here.
Another is Mitch Jones, who runs the Price Momentum model. He typically holds no more than five stocks.
Right now, he has about 27% of his portfolio in cash, with the rest spread nearly evenly among three small and microcap holdings.
