The power of mean reversion

When it comes to investing in funds, don’t chase the top performers – look for the cheapest ones.

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Don't buy the winners

"Past performance is no guide to future performance." That's what the warning signs on marketing literature always tell you. And yet both professional and private investors have a hard time letting go of history when it comes to choosing which investments to buy. Studies in the past have already shown that institutional investors tend to buy funds that have a recent track record of beating their peers and selling the ones that don't. And a more recent study from data provider Morningstar finds that the same is true for the likes of you and me.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.