What The Study Found
A detailed study shared by Edelweiss Mutual Fund used ACE Mutual Fund data as of March 31 to compare different investing styles. The study looked at the top 250 stocks and tested what would happen if each investing style was followed with a portfolio rebalanced every three months. The styles included momentum, value, growth, quality, and low volatility investing. The goal was simple: find out which style gave the best long-term returns.
Momentum Was the Clear Winner
The results from the last 10 years were very clear. Momentum investing delivered the highest return with a 24% CAGR. Value investing came next with 21% CAGR. Growth and quality investing both delivered 16% CAGR, while low volatility investing returned 15% CAGR. Every style made money over the long term, but momentum investing stood well ahead of the others and produced the best overall performance.
Long-Term Back Test Gives the Same Answer
The study also tested these investing styles over a much longer period starting from 2010. Over 16 years, low volatility investing increased capital by around 7.5 times. Value investing grew capital by about 11.8 times. Growth investing reached around 12.5 times, while quality investing delivered about 14.3 times growth. Momentum investing again came out on top, increasing capital by an impressive 23 times. This shows that momentum investing was not just strong over one period but also remained the best performer over many years.
Why Momentum Keeps Winning
These results are not limited to one study alone. Many research papers from different countries, using data going back 100 to 200 years, have also found that momentum investing has consistently outperformed other investing factors. The biggest challenge is not the data itself. The real challenge is understanding how momentum works and following the strategy with discipline. The numbers are strong and leave very little room for doubt.
A Simple Way to Start
There is no need to move all your money into momentum investing on the first day. A better approach is to start slowly. For example, if you have ₹100 to invest, you can begin by putting ₹10 into a momentum strategy. Over time, as you gain confidence and see the results yourself, you can slowly increase the amount. This step-by-step approach helps you learn while keeping your investment journey comfortable.
The Key Lesson
The data clearly shows that every investing style has created wealth over time, but momentum investing has delivered the strongest performance among them. For investors looking to improve long-term returns, momentum is a strategy worth understanding and exploring. Starting small, staying disciplined, and following the process consistently can make a big difference over the years.
