According to Mark Hulbert of MarketWatch.com, the answer is no. Buying last year’s winners is a not a winning strategy. It is often more true that past winners become future losers.
The best thing you can do when examining the 2016 performance rankings is to sit on your hands.
That’s because, if you behave like the average investor, you will be sorely tempted to begin following those advisers and strategies with the best 2016 returns. More often than not, that turns out to be a bad idea.
This is important advice at any time, but especially now, since in the next few days you will be inundated with rankings showing who did the best in 2016.
To illustrate why you shouldn’t immediately invest in those funds that did best last year, consider those that were in the top quartile for performance three years ago. Believe it or not, many of them were in the bottom quartile for performance over the last 12 months.
That is what emerged from the latest “Persistence Scoreboard” produced by S&P Dow Jones Indices. Their report, in a year in which the Dow Jones Industrial Average climbed 13.4% and the S&P 500 gained 9.5%, led by the energy and financial sectors, should be must-reading for those of you otherwise tempted by the funds at the top of the year-end performance rankings.
You can read the full story here.
Jeremy Jones, CFA
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