FYI: It’s only natural for someone invested in a poorly performing active equity mutual fund to wonder if it’s time to make a change. Should an investor sell a fund if it trails its benchmark for a year? Three years? Five years?
Turns out, active equity mutual funds that beat their benchmark over a 15-year period experience a whopping nine years of cumulative underperformance on average! Conversely, and perhaps even more surprising, funds that ultimately underperform their benchmark over the same 15-year period cumulatively outperform over 11 of those years on average.
Regards,
Ted
https://www.advisorperspectives.com/articles/2019/10/07/how-long-can-a-good-fund-look-bad
Comments
1) When a fund lags, you can't predict it will do well in the next 5-10, it can be an underperformer for years to come.
2) Financial adviser? I can write 3 pages of why not
3) What I have done for years is to invest in only 7-8 funds max (in the last several years 4-5) by looking at 1-3-12-36 months good risk/reward and then select the best ones with 1-3 momentum. That lead to holding some funds for months and some for weeks and the exceptions, like PIMIX, for years. Each of my funds must do well if not, it will be replaced. I call it my NBA team, I'm going to the playoff each year but winning the title isn't guaranteed. I have my core players and supporting player but even the biggest stars are not immune from sitting out.
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From the article below
What can we do?
1) Have a predetermined investment process with a disciplined approach to buying, assessing and selling investments. To discourage myopic focus on a particular investment, build a portfolio of diverse strategies that perform in different ways and in different market conditions.
2) Be willing to accept periods of underperformance. During tough times, take your eyes off performance with a qualitative assessment. Understand a manager’s investment strategy and process: How do they make investments? Are they staying true to their strategy? Are market conditions impacting their strategy?
3) Work with a financial advisor who can help to maintain discipline, patience and a long-term focus.
mostmutual fund investment return data shows to be why 'investor return' does not even come even close to 'fund actual performance'.Inception July 2000
“During the 2000-02 bear market the Hussman’s fund posted phenomenal performance by sidestepping most of the carnage and posting gains.”
https://awealthofcommonsense.com/2014/02/curious-case-john-hussman-understanding-biases-process/
Predicting the future is an impossible task. That’s especially true regarding investment projections. Current performance is no certain predictor of future success or failure. Good luck will exceed talent in most instances.
One obvious and simple solution is to construct a portfolio of Index funds!!!
No great returns, but simply market averages. That strategy will outdistance most market wizards. That’s enough for me and my modest requirements and expectations.
Best Wishes
That lead me to SGIIX,FAIRX,OAKBX) 2000-2008.
In the last several years I have uses 1) USMV instead of the SP500 2) PRWCX for allocation 3) PIMIX for multisector until 2017 and since then IOFIX,JMSIX,JMUIX
SPLV is doing better than USMV in the last year and both better than SPY.
See PV(link)
The above show that Sharpe+Sortino are much better for USMV than VFINX(SP500) and even PRWCX(allocation) is better because performance is close but SD and others are better.