Why do we think the saying “we shouldn't invest in mutual funds by seeing their past performance” is kind of Bull sh*t.
‘Past performance is not indicative of future performance’ this is what most brokerages say about mutual funds, but should we really consider this seriously?
Honestly, we really don’t think so. On the contrary, the average return generated by a fund on a 3 year span and a 5 year span do matter more than we think it does. Because in this span of 3 and 5 years, the market would probably see many up and downs, and if the fund manager sailed their mutual funds through these rough patches, and still made a good return compared to the other funds, isn’t it an indicative of their efficiency? Just imagine how well could they do on an uptrend market, or if the same bumpy market way continues? They are most likely to continue the same, because if they don’t try to do their best, they would loose their investors and that would take a toll on the fund house earnings itself. So it makes sense to pick and put our money into an efficient fund house which proved itself in those rough patches with a better 3yr and 5yr return than the others in the same category.