Stay up to date
  • Business Insider

The Past Performance Of A Mutual Fund Is Not An Indicator Of Future Outcomes ... 96% Of The Time


It's almost impossible to ignore past performance when picking a mutual fund to invest in. Indeed, past performance is often the first thing a mutual fund will reveal about itself.

"The phrase 'past performance is not an indicator of future outcomes' (or some variation thereof) can be found in the fine print of most mutual fund literature," writes Aye Soe, Director of Global Research & Design for S&P Dow Jones Indices. "Yet due to either force of habit or conviction, investors and advisors consider past performance and related metrics to be important factors in fund selection."

Because of the way our brains our wired, we often believe that a mutual fund that did well in the past should therefore do well in the future.

But that's a mistake.

Soe reviewed the performance of 687 actively managed domestic U.S. equity mutual funds.

"Very few funds can consistently stay at the top," writes Soe. "Out of the 687 funds that were in the top quartile as of March 2012, only 3.78% managed to stay there by the end of March 2014. Further, 1.90% of the large-cap funds, 3.16% of the mid-cap funds and 4.11% of the small-cap funds remain in the top quartile."

In other words, past performance was not an indicator of future outcomes 96.22% of the time.

Less than a quarter of the top performing funds were still at the top in the next year.

Prospective mutual fund investors often use their own lack of investing knowledge as an excuse for relying on past performance as an indicator. However, they might actually be better suited by just throwing a dart a list of mutual funds.

http://www.businessinsider.com/mutual-fund-performance-persistence-2014-7


Portfolio &
Money Management

Resources

Contact Us

Headquarters:
Stamford
Other Locations:
Chicago
Baltimore​

 

 

IMPORTANT DISCLOSURE INFORMATION   

 

ADV Part 2 | ADV Part 3 (CRS) Privacy Policy | Cyber Security Policy | Business Continuity Plan Client Secure Upload

 

Check the background of this firm on FINRA’s BrokerCheck.           

 

NS Capital LLC is a Registered Investment Adviser. NS Capital and its representatives are in compliance with the current filing requirements imposed upon registered investment advisers by those states in which NS Capital maintains clients. NS Capital may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. NS Capital’s web site is limited to the dissemination of general information pertaining to its advisory services, and through the NS Blog access to additional investment-related information, publications, and links.  Accordingly,  NS Capital’s web site on the Internet should not be construed by any consumer and/or prospective client as NS Capital’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.  Any subsequent, direct communication by NS Capital with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of NS Capital, please contact the SEC or the state securities regulators for those states in which NS Capital maintains a notice filing.  A copy of NS Capital current written disclosure statement discussing NS Capital’s business operations, services, and fees is available from NS Capital upon written request. NS Capital does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to NS Capital’s web site or incorporated herein, and takes no responsibility such content.  All such information is provided solely for convenience purposes only and all users should be guided accordingly.

 

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by NS Capital), will be profitable or equal any historical performance level(s).

 

Certain portions of NS Capital’s web site (i.e. newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, NS Capital (and those of other investment professionals) positions and/or recommendations as of a specific prior date.  Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s).  Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from NS Capital, or from any other investment professional. NS Capital is neither an attorney nor an accountant, and no portion of the web site content should be interpreted as legal, accounting or tax advice. 

 

Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if NS Capital is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as a current or past endorsement of NS Capital by any of its clients.  Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Each client and prospective client agrees, as a condition precedent to his/her/its access to NS Capital web site, to release and hold harmless , NS Capital’s officers, directors, owners, employees and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized individual advice from NS Capital.

© 2020-2025 NS Capital LLC. All Rights Reserved.