Ch.10 · Benchmarks and Performance Evaluation · medium
Why is it important to evaluate mutual fund performance over multiple time periods?
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EXPLANATION
A fund may look great over 1 year (coinciding with its strength) but poor over 5 years. Or a fund may look poor over 1 year (due to its style being out of favour) but excellent over 10 years. Evaluating performance across multiple standardized periods — and especially using rolling returns — provides a much more complete and reliable picture of fund quality.
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