When you spot an article titled 'The Market's 10 Best Funds', you might be tempted to think that if you'd read it you'd get a list of ten great mutual funds that are set to produce market beating returns in the years ahead. Not so for readers of a recent posting on The Motley Fool. Readers who clicked on that snappy headline were treated not to a list of inexpensive, high-quality funds in undervalued categories, but merely a list of the top performing funds of the last ten years:
The Motley Fool's list of 'Best Funds' is actually more likely to under-perform the market going forward than funds chosen at random. That's not just foolish, it's stupid.
When you spot an article titled 'The Market's 10 Best Funds', you might be tempted to think that if you'd read it you'd get a list of ten great mutual funds that are set to produce market beating returns in the years ahead. Not so for readers of a recent posting on The Motley Fool. Readers who clicked on that snappy headline were treated not to a list of inexpensive, high-quality funds in undervalued categories, but merely a list of the top performing funds of the last ten years:
As we are sure the decidedly un-foolish readers of MAXfunds.com know, one way to all but guarantee poor returns going forward is to buy funds based on past performance. Of the funds that topped the ten-year performance charts back in 2000 (Invesco Technology II [FTCHX], T. Rowe Price Science & Tech [PRSCX], Spectra [SPECX], RS Emerging Growth [RSEGX], Janus Twenty [JAVLX], Managers Captl Appreciation [MGCAX], Dreyfus Founders Discovery F [FDISX], Janus Venture [JAVTX], American Cent Ultra Inv [TWCUX], Fidelity Growth Company [FDGRX]) none have since performed better than the S&P 500.
The Motley Fool's list of 'Best Funds' is actually more likely to under-perform the market going forward than funds chosen at random. That's not just foolish, it's stupid.