Please ignore the past when buying a mutual fund.

Please ignore the past when buying a mutual fund.

How to lose your money fast.
Feb. 21 2007 7:24 AM

History Is Bunk

Fund A grew 15 percent a year. Fund B grew 3 percent. Don't be a sucker and buy Fund A.

Browse the entire Bad Advice series here.

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The bottom line: Although common sense suggests that scrutinizing past performance should enable you to select funds that will perform well, it usually won't. There are some instances in which past performance is a good predictor of future performance: with index funds, for example, or in cases in which a fund's good results are due to low costs. In most cases, however, past performance is irrelevant.

Henry Blodget's book, The Wall Street Self-Defense Manual, was recently published by Atlas Books and Slate. You can buy the book here. You can learn more about it here.

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