Chasing After Performance
Many investors or traders will select asset classes, strategies, managers, and funds based on a current strong performance. The feeling that "I'm missing out on great returns" has probably led to more bad investment decisions than any other single factor.
If a particular asset class, strategy, or fund has done extremely well for three or four years, we know one thing with certainty: We should have invested three or four years ago. Now, however, the particular cycle that led to this great performance may be nearing its end. The smart money is moving out, and the dumb money is pouring in.
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