Quantifying the impact of chasing fund performance

From: wealthmanagement.com

Given many investors’ goal of maximizing return, it’s not surprising that some investors select funds based primarily on the funds’ recent performance record. But is that a prudent strategy?

This research note simulates a performance-chasing strategy among U.S. equity mutual funds for the ten years ended December 31, 2013; we then compare the results with a buy-and-hold strategy over the same period. Our analysis shows clearly that buy-and-hold has been the superior approach.

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