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Matthias Knab, Opalesque: Virtus Investment Partners has published this comment on Harvest Exchange:
So much effort in investing goes toward identifying "winners." In the world of actively managed mutual funds, we search for managers who can outpace their peers and beat the market. We know how difficult this is, but we also know it’s important: a better showing over the long-term makes it more likely we can meet our financial objectives. There’s a catch, however.
Research we’ve conducted at Virtus Investment Partners suggests that a fund’s path to the winner’s circle is almost never a straight line. In other words, in our quest to make "better" investments, we should accept that even those which are winners in the long run will all endure bouts of underperformance, sometimes for uncomfortably long periods of time. Responding effectively to those inevitable ebbs and flows is a behavioral challenge that sits at the center of being smart with your money. To clarify this dynamic, we looked at thousands of funds in the Morningstar database and asked: How frequently are funds with top quartile returns in their peer group over the past ten years actually ranked in the top quartile at any particular time?The answer is clear: Not very frequently.
Here’s how we cut the data. First, we screened across 13 major equity fund categories: the nine U.S. equity categories (small-, mid-, and large-cap; value, blend, and growth), foreign large value, foreign large blend, foreign l...................... To view our full article Click here
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