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Avoiding a Top Investment Mistake

Last update on: Jun 18 2020

Don’t expect 2014 to be a repeat of 2013. A key mistake people make with their finances is to expect the future to be like the best and especially for the future to be like the  most recent past. It rarely works out that way. Take a look at these examples from Reuters.

One of the best regular benchmarks for fund performance is the S&P Dow Jones Indices’ Persistence Scorecard, which McGraw-Hill Financial issues twice a year after it researches fund records over several annual periods.

Through September of this year, S&P found that only 19 percent of large-company funds, 20 percent of mid-sized company funds and 27 percent of small-cap funds held their top-half performance rankings over three-consecutive three-year periods. That means up to 80 percent of top-performing funds couldn’t repeat their great returns.

Over a half-decade – five consecutive annual periods – the persistence shortfall is even worse: Only about 8 percent of large-cap funds, less than 1 percent of mid caps and about 10 percent of small caps were repeaters in the top ranks.

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