You hear time and time again that investors shouldn’t chase performance. But a recent Morningstar study found that top performing funds in the previous year do, in fact, continue to benefit over the next year.
So which mutual funds did the best or the worst in 2015?
Morningstar’s manager research analyst Alex Bryan attributes funds’ short-term persistence to their exposure to momentum stocks. Funds may also be more heavily weighted toward certain styles or sectors.
Certain funds on the list here, sourced from Morningstar, show that to be true. For example, energy was the worst-performing sector in the S&P 500 last year, down 24 percent. So energy-focused funds, such as the Direxion Monthly Natural Resources Bull 2X Fund, the Salient MLP & Energy Infrastructure II Fund, and the Highland Energy MLP Fund, performed poorly.
Emerging markets, especially China, took a hit in 2015, so funds that were short or inverse this asset class did very well, including the ProFunds UltraShort Emerging Markets Fund and the Rydex Inverse Emerging Markets 2X Strategy fund.
Here are the top and bottom performers of 2015, based on preliminary returns.