Most articles I found on the net suggest to focus on the long term performance (>=5 yrs) when picking mutual funds. I wonder why isn't it good idea to always maintain the top 10 funds over the 12 months in my porfolio ? Let say Fund ABC has returns of 10%, 10%, 20%, 10%, 50% in past 5 years (20% annually) and Fund XYZ which has 25% annual return for 5 yrs period but only 10% return last year
My arguments are
1) Good performance in the past 5 yrs does not mean the fund will continue for the next 5 yrs, and
2) Funds that have been on the top 10 in last 6-12 mths are likely to continue to provide good return for the next 6-12 mths. Fund ABC will likely to have 30%-40% next year. Even if it doesn't, if I pick top 10 funds with such returns, their average return for next year will likely be in that range
If I keep updating my porfolio every year for 5 years, my return will be 30-40% annually. If I invest in fund XYZ my return will stay at 25%).
So why not?
2006-12-06
14:58:08
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4 answers
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asked by
Astro newbie
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in
Investing