Sunday, May 12, 2013

Past performance does not predict future returns: More evidence

Consider the 51 advisers out of more than 200 on the Hulbert Financial Digest's list who beat the market in the decade-long period that ended April 30, 2012, as measured by the Wilshire 5000 Total Market index, including reinvested dividends.

Of that group, just 11—or 22%—have outperformed the overall market since then. That's no better than the percentage that applies to all advisers, regardless of past performance. Over the past year, on average, the group has lagged the Wilshire index by 6.2 percentage points.

In other words, going with a recent market beater doesn't increase your odds of future success.