From an article titled “Phillips Hager Tortoise Outpaces Hares” written by Rudy Luuko of Morningstar.
Lots of clients love to point to one-year performance figures as a reason to buy or sell a particular fund. As this article explains, these figures can be very unrepresentative of long-term performance. It is very unlikely for a fund that tops a performance list one year to be in that same spot the following year. In the end, things revert back to the mean.
The author reminds us that most equity funds who have posted high double digits returns last year have also lost money in the past 3 years. Funds that have the more credible 3-year or 5-year returns may not lead the pack in any given year, but finish strong in the end.
To read the full article, click here.