Momentum investing is one of the more widely followed factor-based strategies. This approach is based on the premise that when trying to predict where prices are going, it is helpful to know where they have been.
What is a momentum factor?
The momentum factor focuses on securities with improving fundamentals that have recently outperformed and may continue to do so over the medium term.
- Typically defined as price momentum
- One common way to measure momentum is to classify stocks by 12-month price returns
Why does it matter?
Stocks with favourable market sentiment have earned excess returns over stocks with weaker recent trends
Companies with improving fundamentals and positive business trends can outperform the market over several quarters, and price underreaction by the market allows momentum investing to work
Other market sentiment indicators can also add to returns because of the biased way that investors act on information or misinterpret market sentiment
Fidelity Canada Momentum Index ETFs
Fidelity Canadian Momentum Index ETF
Fidelity U.S. Momentum Index ETF
Fidelity U.S. Momentum Index ETF - US$
Fidelity U.S. Momentum Currency Neutral Index ETF
Fidelity International Momentum Index ETF
Fidelity for momentum factor-based investment strategy
At Fidelity, our momentum factor funds seek to track the performance of tailor-made indexes that are actively designed. The Fidelity Canada Momentum Factor Index is designed to reflect the performance of stocks that exhibit positive momentum signals. Typically, stocks with above-average returns and positive investor sentiment have tended to outperform over the medium term.
Single-factor exposure to companies that exhibit positive momentum signals
An outcome-oriented approach that follows market trends and sentiment which has the potential to outperform over the medium term
An efficient complement to a well-diversified portfolio