Numbers You Can’t Count On
Five ways in which a fund’s impressive record vs. peers may not realy indicate much:
- The best performance came under a portfolio manager who is no longer with the fund
- The fund has become too large to efficiently invest in the market segment or style that produced its best results
- The fund invests differently than most of the others it is being compared to, so the peer group isn’t a good fit
- The fund has a flexible charter and tends to bounce among categories; its numbers look good in one category but look like a laggard in another
- The fund changed its investment mandate partway through the time period you are looking at
Learn more about how common measures of mutual-fund performance sometimes tell you a lot less than you might think in this Wall Street Journal article from Michael A. Polluck.
Mutual-Fund Performance Numbers May Tell You Less Than You Might Think – WSJ.comhttp://online.wsj.comSome of the most common investor tools—from numbers of stars to comparisons with benchmarks—have quirks and limitations that can render them far less helpful than people think.