Momentum investing is best described as:

• A. Momentum investing involves picking shares whose price is rising
• B. Momentum investing involves buying when prices fall
• C. Momentum investing disregards price trends
• D. Momentum investing is the same as value investing

Answer: (A)

Momentum investing centers on price trends and aims to profit from continuing price movement. It involves buying shares that have recently risen in price, with the expectation that the upward trend will persist in the near term as more investors jump on board and push prices higher. This approach relies on the idea that winners tend to keep winning for a while because of positive feedback in the market.

The description that fits best is buying shares whose price is rising. Buying when prices fall would be a contrarian or value-oriented move, not momentum. Disregarding price trends contradicts the whole idea of momentum, and treating momentum as the same as value investing mixes two different strategies.