Many of the investors get into the fallacy of selecting the best performing scheme based on the past returns received. They forget the disclaimer that past returns are not an indication of future performance. That is why they pick the scheme at the top or near the top and thereafter said scheme goes into burst for many years.
One very basic thing they forget that every asset class keeps on performing as per the rotation and nobody actually can predict which one is going to be the best or worst performer the next year or so.
You can see from the given below data table for various asset classes - Domestic Equity, Internation Equity, Gold & Bond, no one remain at the top consistently.
Last 15 years, you can clearly see there is a shift in the asset class performance.
The logic is simple, take some money out from the best-performing asset and infuse in worst performing and keep on rebalancing it every year.
No comments:
Post a Comment