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Many investor presentations and fund brochures focus on three year returns. But without a bear market since 2009, how can investors see how a fund handles volatile markets using three year returns?
Past returns can never predict the future, but an investor can learn something about the resilience of a fund manger’s strategy by examining how the fund performed in past times of turbulence.
John Coumarianos suggests using 15 year returns for fund analysis today, so investors can see an entire cycle included.
The future ain’t what it used to be, Yogi Berra said. But now, when it comes to evaluating mutual funds and ETFs, it seems the past ain’t what it used to be either.
That’s because the most recent decade—a time frame that is the basis for the most popular mutual-fund ratings—no longer contains a bear market for large-cap funds. That means the funds haven’t been tested by adversity.
And that means investors should supplement standard fund ratings with a 15-year retrospective. Only then can they get a more accurate picture of how a fund is likely to behave moving forward.
Read more here.
