Performance Persistence Among U.S. Mutual Funds
It's no secret that investors often interpret past performance as evidence of manager skill and put their money to work accordingly. But risk-taking that paid off in the past may not continue to do so in the future. In this study, Morningstar analysts Alex Bryan and James Li assess the merit of selecting actively managed mutual funds based on past performance.
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Key Takeaways:
Although relative fund performance may persist in the short term, there’s no meaningful relationship between past and future fund performance in the long term.
The odds of picking a future long-term winner from the best-performing quintile in each category aren’t much different than selecting from the bottom quintile.
Survivorship rates are higher among previous winners than among previous losers.
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