How important is it to stay invested for a long period of time rather than chasing the best performing funds?
Chasing the best performing fund is a good idea but difficult. In fact, you can invest in the erstwhile best performing fund. However, it will be great if you are able to invest in a fund that becomes best performing after you have invested in it.
No doubt, it is tough to guess the best performing fund in the coming years. Only magic or astrology can help here. However, the next best thing to do is to stay invested in a good fund having variables that are predictable like stable management and superior performance in both declining as well as rising markets. If these two things are validated over one or two full market cycles, then you will end up investing in a good performing fund.
In a nutshell, a good performing fund should be the aspiration and if the same fund happens to be the best performing fund, then it is good for you. The rule, therefore, is to be patient with your investments, as being overactive can be injurious to your financial health.