2020 seems to have restored our belief in wizards, wands, fairy dust, and the powers of the Great Wizard Jerome (Powell). It is a year in which more funds and ETFs posted 100%-plus returns than any I know of. Setting aside leveraged, double-leveraged, triple-leveraged, and inverse-leveraged funds (please set them aside!), 36 funds posted triple-digit returns in 2020.

This list is long, but not terribly diverse. Read the prospectuses and you’ll come across the same words over and over: focused, concentrated, disruptive, innovative, disruptive innovation, next-gen, thematic, pure-play, sustainable.

I’m passionate about the “sustainable” part; really, our children’s and grandchildren’s world hangs in the balance. If we’d acted when we first discovered the role of human activity on disrupting the global climate – nearly 50 years ago – modest and unremarkable changes (from stepping up the replacement of Depression-era power grids to avoiding our embrace of 74oo pound urban assault vehicles) would have led us to a far less threatening future. But if the best time to act was 50 years ago, the second-best is surely “now.”

That said, many of the Titans of ’20 show the same performance chart, here illustrated by the Invesco WilderHill Clean Energy ETF.

This is a fund that had lost money in six of the preceding nine years. An investment made in the fund in February of 2011 was still underwater almost 10 years later. And then, without noticeably economic and government tailwinds, the returns exploded. An investment made on March 31, 2020, quadrupled in value by year’s end.

For many funds, 2020 will have been the high point of their existence. By way of illustration, the table below identifies the mutual funds which returned 30% or more last year after having trailed 66-100% of their peers in 2019, 2018 and 2017.

The members of the Centennial Club – the funds that posted triple-digit gains in 2020 – show the same pattern of inconsistent excellence and high volatility, if to a lesser degree than the funds above.

Bottom line

Without any question, some of these are very fine funds. Likewise ETFs. But you cannot now buy the fund’s 2020 returns, so you should not use them to justify 2021’s purchases.