How to resist last year's winning mutual funds
THE temptation is oh so great. Wouldn't it be convenient to invest in a list of last year's top-performing mutual funds and hope for the best?
After all that's the recommendation of far too many financial journalists, who then move on to other things, conveniently forgetting the warning sticker of every mutual-fund company that past returns are never guaranteed. I will refrain from this kind of financial delusion. While you can never expect yesterday's winners to continue their streak, you can make an argument for hedging risk and grabbing returns through diversification.
Last year's gainers were a case in point. International stock mutual funds that specialised in bargain-priced or value companies did extremely well. There are sound reasons for buying and holding them –and for not overloading on them.
Some of the advances posted by these funds were nothing less than spectacular. The top 15 in the Bloomberg mutual funds database were dominated by non-US small-cap companies, valued between $500 million and $1 billion. All of those funds gained at least 29% last year.
Investors Should Look At Broad-Based, Passive International Portfolios to Hedge Risks(John F Wasik) CHICAGO
THE temptation is oh so great. Wouldn't it be convenient to invest in a list of last year's top-performing mutual funds and hope for the best?
After all that's the recommendation of far too many financial journalists, who then move on to other things, conveniently forgetting the warning sticker of every mutual-fund company that past returns are never guaranteed. I will refrain from this kind of financial delusion. While you can never expect yesterday's winners to continue their streak, you can make an argument for hedging risk and grabbing returns through diversification.
Last year's gainers were a case in point. International stock mutual funds that specialised in bargain-priced or value companies did extremely well. There are sound reasons for buying and holding them –and for not overloading on them.
Some of the advances posted by these funds were nothing less than spectacular. The top 15 in the Bloomberg mutual funds database were dominated by non-US small-cap companies, valued between $500 million and $1 billion. All of those funds gained at least 29% last year.
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