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Past performance is no guarantee of future moves in the stock market. You’ve probably heard that saying at least a handful of times if you invest in passive products such as mutual funds, index funds, or exchange-traded funds (ETFs).
And while chasing returns (new investors just love momentum stocks, don’t they?) can be a source of immediate satisfaction, it could set up some to be showing up to the ball right before the punch bowl is taken away, whether by the U.S. Federal Reserve (the Fed), a big corporate earnings fumble, hot inflation data, a black swan event or something else.
In any case, I think that the five-year chart for a stock is worth paying attention to, provided that all other factors (think valuation, fundamentals, capabilities of management, and the long-term growth story) are still looking good. Undoubtedly, whenever you have a good amount of long-term momentum, a dirt-cheap…
