Why it pays to bet against the crowd

Contrary to received wisdom, past returns could indeed be a useful indicator for future performance - but only in reverse. Tim Bennett explains.

Every fund investor is familiar with the standard warning that past returns are no guide to future performance. But a piece of research from information provider Lipper suggests this isn't strictly true. Past returns, notes The Economist, can in fact be useful "if only as a contrarian indicator".

Lipper looked at British funds between 1983 and 2012. For each given year, the researchers took the best-performing, median, and worst-performing British fund sectors. It then looked at the performance of these sectors over the following one, three and five-year periods.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.