Every year one fund category seems to win the performance charts, and the argument for moving more money into it sounds persuasive in hindsight. I know chasing last year's winner is a poor investment process, yet I'm still drawn to those graphs. I'm trying to write down my target allocation and a rule for reviewing it only at set intervals. What makes it easier for you to ignore impressive recent returns without ignoring meaningful changes in your own goals?
Avoiding performance-chasing after one fund category has a great year
Simulated community examples only. Not financial, tax, investment, or legal advice.
- long-term-investing
- avoiding
- performance
- chasing
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3 replies
A written allocation helps because it gives you something boring to come back to when a chart is being loud. The review schedule matters too...
A written allocation helps because it gives you something boring to come back to when a chart is being loud. The review schedule matters too, since looking every week tends to turn 'recent performance' into 'my whole personality'.
I keep a note to myself that says 'past returns are the seductive liar in the room.' It is a little dramatic, but apparently my brain needed a bouncer.
I find it easier when I define what would actually justify a change before the year starts. If my goals, time horizon, or risk needs haven't changed, the shiny graph doesn't get a vote.
Same. Otherwise every good run looks like a revelation and every bad run looks like a mistake, which is a terrible way to make decisions.