Make the most of buying exciting new funds, because holding onto them is not always quite so fun. That’s partly because returns can be patchy when it comes to the likes of stockpickers: the funds that deliver huge outperformance in a given year could well have a terrible run later on, often for entirely legitimate reasons. These ups and downs can be difficult to bear, emotionally and financially.
Funds that give us a more comfortable ride by consistently outperforming are a pretty rare beast. That’s something commonly shown by investment firm BMO’s quarterly Fundwatch report. The analysis reveals how many funds in a given sector have outperformed their peers in each of the last three 12-month periods, looking at those that stayed in the first quartile by performance and those that beat the sector median. The latest edition of this research found that just 20 out of 1,085 funds delivered consistent top quartile returns in the three-year period to the end of March 2021.
And just 103 out of the 1,085 funds consistently delivered returns above the median for their sector. This marks a fall in the consistent outperformance rate, from a previous 16.2 per cent to just 9.5 per cent.