January 3, 2014
Why Following the Winners Is for Losers
by Mark Hulbert
“Past performance is no guarantee of future results.”
This phrase, ubiquitous in the small print of financial products, often falls on deaf ears, according to Adam Reed, a finance professor at the University of North Carolina at Chapel Hill. “Investors have a tendency to rush into those funds that are at the top of the previous year’s performance rankings,” he says, citing numerous studies.
Joseph Tucci, the chairman and chief executive of EMC, recently added to the Turnaround Letter’s buy list. Bloomberg News
They shouldn’t. The evidence is that last year’s top performers will lag behind the market in 2014—if not lose a lot of money.
You should instead be focusing on strategies with superior track records over far longer than just the last 12 months. More like 15 years, in fact.