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An online investment blogger advises investing in mutual funds that have performed badly the past year because ""regression to the mean tells us that they will do well next year."" Is he correct?

User Alonad
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1 Answer

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No , he is not correct

Step-by-step explanation:

He's not right, because other factors, such as recession, economic crisis, large debts, etc, might be the source of the bad performance.

It means not that bad performance stops next year, so a lot of money can be wasted if the bad performance carries on.

Investors find some negative factors significant to mutual funds, like high cost ratios paid to the investor, undisclosed front and back-end costs, lack of control over investment decisions and skewed returns, that are perceived to be bad investments.

User Zora
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