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What's Predicted Funds' Performance?

Observant1
edited May 20 in Other Investing
Jeffrey Ptak from M* performed an interesting study which appears to contradict
the common belief that past fund performance can not effectively predict future performance.

"In summary, even if you ignored fees and chose funds based on their past pre-fee performance,
you still tended to do better *after* fee over subsequent periods."

"We can get into the hows and whys in a different post, but pre-fee past performance
did a very good job of predicting funds’ subsequent performance, on average,
over the past few decades, almost no matter which way you looked at it."

https://jeffreyptak.substack.com/p/whats-predicted-funds-performance

Comments

  • WABACWABAC
    Thanks for the link. Interesting read.

    I always wonder why these looks in the rear-view mirror always end at some year. Why not go all the way back to where ever the data begins?

    I don't subscribe. Was there ever a follow up post on whys?

    Also, kind of surprised this wasn't published at M*.
  • yogibearbullyogibearbull
    edited May 20
    It was published at Morningstar too,
    https://www.morningstar.com/funds/what-has-predicted-funds-performance-thing-that-wasnt-supposed-work
  • Observant1
    edited May 20
    The author wrote this article as a follow-up.

    So, in summary, past pre-fee returns seemed to forecast future pre-fee returns,
    and expense ratios were a strong predictor of subsequent net returns.
    What if you were to combine the two by grouping funds based both on their past
    pre-fee performance and their cost?

    https://www.morningstar.com/funds/what-worked-fund-investors-pinching-pennies-letting-winners-run
  • WABACWABAC
    Thanks for all the help. Always appreciated.

    I wonder if he looked at turnover ratios at all.
  • yogibearbullyogibearbull
    @JPtak (MFO) is Morningstar Managing Director of Research. He posts at Morningstar (see link below), LinkedIn, X/Twitter, Substack, etc.
    https://www.morningstar.com/people/jeffrey-ptak
  • WABACWABAC
    yogibearbull said:

    @JPtak (MFO) is Morningstar Managing Director of Research. He posts at Morningstar (see link below), LinkedIn, X/Twitter, Substack, etc.
    https://www.morningstar.com/people/jeffrey-ptak

    And, from time to time, posts here.
  • FD1000
    edited May 25
    Good read. My conclusion over decades is that good funds will continue to be top funds
    in the future until markets change and why I started investing this way in 2000.
  • davidrmorandavidrmoran
    edited May 28
    FD1000 said:

    Good read. My conclusion over decades is that good funds will continue to be top funds
    in the future until markets change and why I started investing this way in 2000.

    sounds as though you have done some backtesting.

    I held a lot of tweix, cgmfx, fairx, glrbx, and mapox back then.
  • larryB
    At davidmoran…. I held three of your old holds as well. We thought they were good funds till they weren’t. I have come to accept that Bogleheadism has some truth to it. But what fun is that?
  • FD1000
    edited May 28
    davidrmoran said:

    FD1000 said:

    Good read. My conclusion over decades is that good funds will continue to be top funds
    in the future until markets change and why I started investing this way in 2000.

    sounds as though you have done some backtesting.

    I held a lot of tweix, cgmfx, fairx, glrbx, and mapox back then.
    My ORIGINAL system is based on funds with good 1-3 years of performance and selecting the ones with the best 3-6 months of momo.
    During 2000-10, I held the following 3 funds for between 7-9 years. FAIRX,OAKBX,SGIIX. The rest of the history is at (link).
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