Combining both Momentum and Income Investing
Combing income investing and momentum investing can work well. After all the more things that are working for you the better.
Everyone knows what dividend investing is, but what is momentum investing? Momentum investing is simply investing in stocks that are going up. They invest with the overall trend and not against it.
For example if stock XYZ started making higher highs and higher lows wouldn’t you want to invest in it? 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 extremely profitable, but only if you do it right. The problem that some investors will have is that they simply hold onto the stock too long. For example they may hold onto the stock as it goes from $30 to $100, yet still hold onto it even as it starts to head down and eventually they lose all their profits.
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 this compare with income 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 far outperform the dividend but not all. 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.
It seems that if you can get a great dividend paying stock that is 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.
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