Combining Momentum Investing With Income Investing
Momentum Investing and Income Investing work really great in a combo. After all the idea is to get the highest return on your money.
We all know what dividend investing is, but what is momentum investing? Simply put momentum investing is investing in stocks that are going up. Momentum investors invest with the overall and not against it.
For example if stock XYZ goes from $40 to $50 to $60 all in the same week doesn’t it sound like a good investment? Of course it is going up after all and shows no signs of slowing down.
Does it actually work? It has the potential to be the most profitable way of investing money, but only if you do it right. The major problem that many investors make is that they simply hold onto the stock too long. For instance they may hold onto the stock as it goes from $50 to $200, but keep holding onto it as it comes back to $30 only a few months later.
Remember this rule, what goes up must come down. Because of this it is normally much wiser to stay into a stock as it is trending up, but then to get out as it shows the first signs of weakness.
If the stock is starting to turn around it is normally a good sign to get out and look for great investments elsewhere.
So how does momentum investing work together with dividend investing? It can work pretty good if you can find a nice uptrending stock that is also paying a high dividend.
In some cases the appreciation will give off much more then the dividend, but this is not always the case. There can also be times where you will hold a stock for many months and end up breaking even; in situations like these it is nice to have another source of income on the stock so you at least made a little bit of money. The dividend will also help you to create an income from your stock while you wait to sell your stock, this can hold off the pressure to sell it too early.
Overall I think if you can find a dividend paying stock in a solid uptrend it can turn into an extremely great trade. But of course the dividend itself is not a good reason to stay in a stock that is turning against you.
