Why the Worst Performing Funds Can Be the Best Investments

Don’t let a temporary slump change your long-term investment plan. If investors quit these funds after periods of underperformance, they would have missed out on subesquent gains

Karen Kwok 22 March, 2016 | 4:10PM

Investors, listen up: One year of underperformance does not necessarily mean a fund will lose investors’ money in the long run. Investors who dumped funds after short periods of underperformance would have missed out on spectacular gains when the fund performance rebounded in the years after, according to data from Morningstar Direct. 

A year after the slump the fund rebounded strongly by 103% 

Records in Morningstar Direct show even the top funds awarded with a positive Morningstar rating of Gold, Silver or Bronze have periods of underperformance. But if you stick with these top rated funds, trusting the analysts’ view, in the long run they deliver stellar returns, proving that investors might not let a market slump change their long-term investment plan.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk

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