Investing Based on Recent Past Performance

By Dan Crimmins on June 18, 2013 in Behavioral Factors in Investing

This post is a sketch created by Carl Richards who has become a frequent keynote speaker at financial planning conferences and visual learning events around the world. Through his simple sketches, Carl makes complex financial concepts easy to understand.

His sketch below highlights the difficultly of investing based on recent past performance. He compares doing this to driving while looking in the rear view mirror. Many investors use recent past performance – what has happened over the last 3 years for instance – which leads to the problem highlighted below.

So when creating an investment portfolio, be sure to focus on the long term historic performance to avoid “investment accidents”. I wrote a post which highlights this problem called “Stopping Future Mistakes” . Click on the silver button below to read.

Stopping Future Mistakes

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The foregoing content reflects the opinions of Crimmins Wealth Management and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.