The Winner’s Curse?

In sports, it is difficult for teams to consistently win year after year over the long run, and it seems mutual fund performance follows a similar trend according to the December 2012 SPIVA Persistence Scorecard.  This scorecard measures the consistency of actively managed U.S. equity  mutual funds over a period of time.

Highlights Of Some Results

  • Of the funds that were in the top quartile in September 2008, only 0.18% of them were consistently able to stay in the top quartile over five consecutive 12-month periods (September 2012)
  • Of the funds that were in the top quartile in September 2010, only 10% remained in the top quartile by September 2012
  • Of the funds that were in the top quartile in September 2007, 24% remained in the top quartile on September 2012.

This goes to show that it would not be prudent to rely on past performance of mutual funds to make future investment decisions.  It is very difficult to perform well consistently with actively managed mutual funds.

To be successful with investing with mutual funds, you have to be able to predict the winner fairly regularly since today’s winners are not likely to stay winners tomorrow.

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