Neutral impactSector
Momentum vs Contra Investing: Why One Loses Retail Investors More Money
NDTV Profit 2 hrs ago·1 Aug 2026, 10:18 am
Momentum investing focuses on buying stocks that have recently performed well, hoping to ride the upward trend. In contrast, contra investing involves buying assets that have fallen out of favour, betting on a market reversal. Kirtan Shah argues that retail investors often struggle with momentum strategies because they tend to buy at the peak, just before prices correct sharply. This approach can lead to significant losses when the trend eventually reverses.
The key difference lies in the psychology of the investor. Momentum investing requires discipline to sell at the right time, a skill many lack. Contra investing, while riskier, offers a potential margin of safety by buying at a discount. For the average investor, sticking to a contrarian approach may reduce the emotional stress of market volatility and prevent the costly mistake of buying at the top of a rally.
Moving forward, investors should evaluate their own risk tolerance and time horizon. If you cannot handle the stress of a falling portfolio, momentum strategies may not suit you. Watch for signs of market overvaluation in popular sectors, as these often signal the end of a momentum run. A balanced, long-term strategy may offer more stability than chasing short-term gains.
Key takeaways
- Category: Sector.
Why it matters
A routine update. Use the price and stock snapshot to gauge how the market is responding.
