This post is by Brian Livingston from StockCharts.com - Blogs
Click here to view on the original site: Original Post
Investing strategies have short-term momentum (the past 3 to 12 months predict the next month) but long-term reversion (the past 3 years deceive you). • Institutions that hire outside money managers routinely fire any analyst who underperforms a benchmark for 3 years. Some fire analysts after just 1 or 2 years. You’ll be shocked to see how much you could earn if you did exactly the opposite.
Figure 1. Don’t fall into the trap of thinking that the past 3 years’ worth of performance predicts good returns in the following 3 years.
We saw in the previous two parts of this series that:
- The stocks that individual investors sell tend to do much better than the stocks the investors buy as replacements.
- The outside money managers that financial institutions fire after