Mutual Funds

The Basics

What about the success of high-performing mutual funds?

Experts at Forbes magazine cite a 2003 study by mutual fund analysis company Morningstar that looked at a 20-year period beginning in 1976, analyzed the returns in five four-year periods, and compared the returns of the best 30 funds in each of those periods against the performance of those same funds over the next period. They found that the star funds did very well during the first period, averaging a return of 28.3%, but in the next period, not only did many of these same funds drop out entirely, but those that remained had returns of only 1.8%. This data is relatively easy to find.


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