{"id":546,"date":"2016-05-05T11:40:51","date_gmt":"2016-05-05T18:40:51","guid":{"rendered":"https:\/\/chaltenadvisors.com\/blog\/?p=546"},"modified":"2016-05-05T11:40:51","modified_gmt":"2016-05-05T18:40:51","slug":"good-track-record-who-cares","status":"publish","type":"post","link":"https:\/\/chaltenadvisors.ca\/blog\/good-track-record-who-cares\/","title":{"rendered":"Good track record?  Who cares!"},"content":{"rendered":"<p>Morningstar has updated it&#8217;s <a href=\"http:\/\/news.morningstar.com\/articlenet\/article.aspx?id=752485&amp;curator=thereformedbroker&amp;utm_source=thereformedbroker\" target=\"_blank\">research<\/a>\u00a0on the factors that might help investors decide which investment funds to choose. \u00a0Once again they find that costs are the only\u00a0reliable indicator of future fund performance. \u00a0The evidence is so clear in this area that they believe it should be among the top two\u00a0criteria to use when screening funds. \u00a0We think this would naturally lead investors to prefer passive investment approaches (using ETFs and low cost index funds) but even among\u00a0active funds, expense ratios are the best predictor of future returns. \u00a0And just to be clear, <span style=\"text-decoration: underline;\">lower fees<\/span> lead to <span style=\"text-decoration: underline;\">better performance<\/span>. \u00a0The chart below illustrates the percentage of funds by cost quintile that both survived and outperformed their category group\u00a0between 2010 and 2015.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-547 size-full\" src=\"https:\/\/chaltenadvisors.ca\/blog\/wp-content\/uploads\/2016\/05\/Morningstar-fund-costs.jpg\" alt=\"Morningstar fund costs\" width=\"986\" height=\"512\" srcset=\"https:\/\/chaltenadvisors.ca\/blog\/wp-content\/uploads\/2016\/05\/Morningstar-fund-costs.jpg 986w, https:\/\/chaltenadvisors.ca\/blog\/wp-content\/uploads\/2016\/05\/Morningstar-fund-costs-300x156.jpg 300w\" sizes=\"auto, (max-width: 986px) 100vw, 986px\" \/><\/p>\n<p>Despite the fact that cost is a better predictor than even Morningstar&#8217;s own star rating system, it isn&#8217;t the only thing to consider when picking an investment fund. \u00a0Funds need to be properly diversified and must have portfolio construction and management strategies\u00a0supported by a strong theoretical foundation\u00a0and empirical evidence. \u00a0Track record should be well down the list of criteria &#8211; past performance doesn&#8217;t tell us anything about future returns.<\/p>\n<p>It should also be noted that the above research was conducted looking at US mutual fund data. \u00a0Mutual fund fees in Canada are nearly twice as high as they are in the US so the benefit of using costs to screen funds should be even greater here.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Morningstar has updated it&#8217;s research\u00a0on the factors that might help investors decide which investment funds to choose. \u00a0Once again they find that costs are the only\u00a0reliable indicator of future fund performance. \u00a0The evidence is so clear in this area that they believe it should be among the top two\u00a0criteria to use when screening funds. \u00a0We <a class=\"read-more\" href=\"https:\/\/chaltenadvisors.ca\/blog\/good-track-record-who-cares\/\">[&hellip;]<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17,10,7],"tags":[],"class_list":["post-546","post","type-post","status-publish","format-standard","hentry","category-costs","category-evidence-based-approach","category-graham-bodel-posts"],"_links":{"self":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts\/546","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/comments?post=546"}],"version-history":[{"count":1,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts\/546\/revisions"}],"predecessor-version":[{"id":548,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts\/546\/revisions\/548"}],"wp:attachment":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/media?parent=546"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/categories?post=546"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/tags?post=546"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}