Archive - December 2011

Why Past Investment Performance Doesn’t Matter

Why Past Investment Performance Doesn’t Matter

Past performance is not an indicator of future outcomes.” You see this all the time in investment literature, especially related to mutual fund performance. Yet, many people still make their investment decisions mostly, or entirely, based on the past performance of the investment. In S&P’s November Persistence Scorecard a few results were cited:

* For the five years ending September 2011, only 9.72% of large-cap funds maintained a top-half ranking over five consecutive one-year periods. The results for mid-caps was only 6.08% of funds, and for small-caps it was only 3.27%. Random expectations would suggest a rate of 6.25%.

* …

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