Jeremy DeGroot discusses a very common malady to which all too many investors succumb: Performance Chasing:
“We like to find managers who have a track record of success. We look at how they’ve performed in different market environments and economic cycles. Ideally you have a 10-year track record, though we’ll look at investors with five.
But there’s a real danger in relying on performance — it’s just a starting point. We also look at their willingness to underperform over short or medium time periods if their process is out of favor. We look at whether they’re sticking to what they know and believe in and what has been successful over time.”
–Fortune, November 8, 2011
That is a very astute observation, something that I have discussed previously; See When Do You Fire a Manager? for more info.