Misconceptions About Past Performance and Future Returns

Photo: ahisgett

Beginner investors, along with many experienced investors who should know better, have a tendency to look at an investment's historical returns when deciding whether to buy.

After all, we look at the past performance of many things in our lives to gauge how they might perform in the future. We buy Hondas and Toyotas because of their reliable histories; we admit students to college based on their high school transcripts; we reject a would-be suitor who cheated on his or her ex.

However, when choosing an investment, past performance should be only a minor consideration. Find out why in my article, Misconceptions About Past Performance and Future Returns.