Should you invest based on past performance?

Learn from the past, but don't live in it. No, we are not drawing a parallel between life and investing. We mean it literally. While a stock's past performance should be considered, it should never be the sole reason for you to invest. Often hype and, at times, the market's infamous shortsightedness drive share prices of duds up for a while. And when the fog clears, and the market finally has an epiphany, prices plummet. So, a strong past performance should never be seen as an omen for grand returns ahead. The numbers agree with us To prove our point further, we conducted this simple exercise. For each year from 2014 to 2018, we invested in the top ten stocks with the highest annualised returns in the past five years. For example, for the year 2015, we invested in stocks that gave the highest annualised returns between 2009 to 2014. N

This article was originally published on June 21, 2023.