Geez. I take a couple days off and some of you guys get so far away from the beaten path that we need tracker dogs.
You armchair quarterbacks & backseat drivers: if you read a book and a couple papers before deciding that an investing style is not for you, then that's great. If you conclude from your survey, however, that it doesn't work then you're not doing your research right. Take the positive assertion of the hypothesis, find someone who's made it work, and learn from them. If no such person exists then sure, that style probably doesn't work and your research is probably complete. However I suspect that you will find a person for whom that investing style works-- and you'll conclude that you'd never want to live in their manner.
As for momentum investing, it works at least as well as value investing. Of course it's a lot more effort, but here's some references to look at and draw your own conclusions.
BTW the "No Load FundX newsletter" is one of
Hulbert's highest-ranked newsletters:
In addition to his rankings of stock-oriented newsletters, Hulbert also ranks mutual fund letters, with his performance data going back a decade. At the top of the 10-year performance list in total return, and second in risk-adjusted performance, is Janet Brown, editor of No-Load FundX, which uses a momentum-based "upgrading" strategy, in which she moves into no-load funds that have shown the strongest performance over the preceding 1-, 3-, 6-, and 12-month periods.
So while MMND may not be inclined to demonstrate her ability to field-strip a portfolio's asset allocation & correlation while blindfolded, she at least chose to buy the advice of someone who's been able to do it for a while.
Anyway, back to momentum. You could start with Rono at FundAlarm.com who's been a momentum investor almost since he came back from his Marine tour in Vietnam. He's shown me a couple of others who have done well at it. One is Gary Smith, who wrote
"How I Trade For A Living". Just reading the first chapter of Gary's recitation of his daily life, where's he's glued to CNBC and hypertrading his IRA mutual funds, will help you decide that the momentum investing routine is not for you. However sparse his life may have been at the time, Gary successfully traded his IRA through 2004. He built it up over a million and ER'd in his mid-50s. Gary is legendary for the clarity of his analysis of technical indicators by demonstrating that they work-- until they don't. Even Gary admits that he can't always tell when an indicator has stopped working. However when an indicator was working he'd frequently put over 90% of his portfolio in that fund and ride it until it trended out. In 2002-4 he made a pile in junk-fund mutual bonds, an achievement which accelerated his retirement.
Rono also recommends
Pony Express Bob in this
post from Google's cache (FundAlarm.com's board rolls its posts after two weeks). Bob essentially beat Bernstein's ass[-]ets[/-] in the mid-90s, albeit with absolutely breathtaking volatility. Since Bob's board works best in a volatile market, it worked very well for those who had the guts to follow it through 2000-2003. But even I didn't have that level of guts.
Another good board for discussing momentum and technical indicators is FundVision.com. (Gary did a lot of his posting over there but may no longer be reading the board.) The admin, Salil, is a very active momentum trader and has a pretty busy discussion board. However he ruined his credibility by overemphasizing his successes and burying his failures. While I became disillusioned with his integrity, many of that board's members successfully rode his (paid subscription) indicators to beat their asset classes.
For an old-school look at momentum investing read Nicolas Darvas'
"How I Made Two Million Dollars in the Stock Market". (This was published over 40 years ago when $2M was actually worth real money.) Darvas was literally dancing his way around the world in the 1950s and trading on momentum trends that he identified from reading stock tickers published in the International Herald Tribune, a method that he admits may not work for everyone.
I tried momentum for a couple stocks in 2001-2. One that worked gangbusters was 4KidsEntertainment (distributor of Pokémon videos & movies) over a four-day period. However much I read and tinkered, I was routinely whipsawed by technicals and sell-stop-losses because I kept insisting on walking away from the computer to [-]go surfing[/-] live my life.
If you're willing to run a daytrader's account with Level II quotes, or if you happen to be able to afford a Bloomberg, then you can probably make momentum investing work for you.
Or, as Bernstein says, you could get a life.