Chasing the Winners

Chasing the Winners

Mutual fund inflows are concentrated at the narrow tip of the most recent top-ranked performers. In the long-term, of course, that is not a winning strategy. There are other metrics to assess a fund’s likely future performance.

Despite repeated reminders that past performance is not indicative of future results, investors have long flocked to the best-performing funds, and why not? Barring any other reliable metric, a fund’s track record is as good as any selling point.

But chasing the winners is getting more complicated. A decade ago most inflows went to funds that carried Morningstar’s top ratings of four and five stars—which comprise about 32.5% of funds in the Morningstar data

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TAGS: Mutual Funds
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