Don't be too sure that stocks are a long-term winner

Take past performance as an example many people think that it's the bottom line as far as picking what's going to do well in the future. Technical analysis or charting is all about discerning the future from the past and extrapolating trends.

Financial planners all over the world pay to get performance statistics for hundreds of thousands of managed funds investing in various asset classes - New Zealand shares, US shares, global shares, emerging markets, property and bonds - because mum and dad want to know, as one local Italian investor puts it, what's a going a good?

Remember back in 1999/2000 trying to sell NZ shares to clients was hopeless. All they wanted was international shares with a bit of technology if you were really up with the play. Buying past performance is popular and easy to do but the odds are stacked against such a strategy because, as common sense tells us, it's already gone up.

These thoughts and several other good ones are argued in a paper entitled What Did We Learn From the Great Stock Market Bubble for a forthcoming issue of the US Financial Analysts Journal. The author is Clifford Asness, of AQR Capital Management of the US.

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