Ch.10 · Benchmarks and Performance Evaluation · medium
What does 'consistent performance' mean in mutual fund evaluation and why is it preferred over occasional exceptional performance?
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EXPLANATION
Consistent performance — outperforming the benchmark in most 1-year, 3-year, and 5-year rolling periods — is more valuable than one exceptional period. A fund that generated 50% in one year but underperformed in most other years may have just been lucky with market timing. Rolling return analysis helps identify truly consistent performers.
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