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Be Careful With 10-Year Returns

By Portage County Business Council

By LouAnn Schulfer,  AWMA®, AIF®
Accredited Wealth Management Advisor®
Accredited Investment Fiduciary®

Past performance is no guarantee of future results.  We as advisors say that all the time.  Yet, when I meet with clients, they tell me that they’ve chosen the investments in their 401(k) by looking at how the funds did in the past.  This seems logical and it may work if the sector and fund are in the middle of a winning streak.  However, there are a few things to take into consideration.  Funds are mandated to file a prospectus, a legal document required by the Securities and Exchange Commission, for investors to review and evaluate the fund.  The prospectus will disclose the objective and parameters of the fund.  For example, if the objective is to invest in growth stocks, the fund must stay invested in growth stocks, regardless of market and economic conditions.  It’s kind of like saying you will always have offense on the field regardless of what else is going on.  Offense may have worked for the past few minutes of the game, but that doesn’t mean you should play offense or keep your offensive players in for the entire game.  Continuing with sports for analogy, evaluating a team for future performance based on past performance can also be a perilous approach.  It would be like betting on last year’s championship team.  If the players or coaches have changed, performance is likely to change.  The same holds true for investment managers and teams.

Still, if you do use past performance as one metric in choosing your investments, be aware that ten-year reported returns for a given fund or strategy likely have recently changed dramatically.  Coming out of the great market decline that was synchronized with the great recession, the S&P began it’s rebound into bull market territory on March 9, 2009.  That means that ten-year returns, beginning with the second quarter of 2019, will not include any part of how the fund or strategy that you are evaluating handled the major market decline.  If you manage your own investments, be sure you have a sound evaluation process in place, and be careful with 10-year returns.

LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Wealth Management and can be reached at (715) 343-9600 or
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC.