Investor Returns vs. Category Returns Morningstar Large-Cap Growth
(Period ending 10/31/2008)
Chart of the Week for Nov. 28, 2008 - Dec. 4, 2008
Mutual funds with attractive past performance tend to gather more assets than funds with less attractive past performance. Investors may be disappointed when they buy today's "hot" fund based on past performance that does not continue in the future - sometimes called "performance chasing". Timing the market successfully requires investors to predict market movements. Unfortunately, few if any, can reliably predict the future and market timing failures tend to detract from performance.
The chart above compares the Morningstar Large Cap Growth Category average return with the Morningstar Average Large-Cap Growth Investor average return. The Category Return represents the average fund return in the large cap growth category and assumes a buy and hold strategy. Investor Return takes cash inflows and outflows into account to approximate the returns earned by a typical investor.
Although all returns are negative, the investor return underperformed the category in each period illustrating investors generally failed to successfully time performance. Failed attempts to successfully time market movements can have lasting effects on an investor's ability to meet his or her investment goals.
The Morningstar Large Cap Growth category is just one category in the Morningstar universe and was selected to illustrate the difference between category and investor returns. Results using other Morningstar categories may differ.
Source of data: Morningstar, Inc. ®. All rights reserved. Morningstar, Inc., is a global investment research firm that is not affiliated with ICMA-RC. Morningstar is used as the source for the average category and the average investor returns. ICMA-RC does not independently verify Morningstar data.
This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing.
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The performance data quoted represents past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Services, LLC by calling 1-800-669-7400 or by writing to 777 North Capitol Street, NE, Washington, DC 20002-4240. Para asistencia en Español llame al 1-800-669-8216. Performance data current to the most recent quarter end is available by visiting www.icmarc.org.