10 Pages Posted: 17 May 2013
Date Written: March 1, 2011
The quotes, news and trading tools made available to investors by stock exchanges and brokerage firms are focused on visualizing short-term performance to “help” individual investors trade easily. However, trading and making money from investments do not necessarily go hand in hand. This paper illustrates how trading based solely on short-term historical performance, the only possible approach for most individual investors who do not have access to better analysis, can result in severe losses or missing out on significant gains, while investing with adequate risk-return expectations is more likely to lead to investment success.
Keywords: risk analysis, manager due diligence, multi-manager portfolio construction, performance analysis
JEL Classification: G11
Suggested Citation: Suggested Citation