Be careful of last year’s winners

Just because a certain investment did well last year doesn’t mean it will be a top performer this year. Ignoring past performance, which factors should you consider before investing in a stock or unit trust?

Schalk Louw

on a few occasions, I have used the story of the duck and the scorpion to illustrate how humans tend to act in a certain way, even if it’s not in our best interest. The duck hesitantly offered to help the scorpion to safety after he got stranded in a flood. Shortly before reaching safety, however, the scorpion stung the duck, which eventually led to the death of both of them. Although the scorpion knew that his actions would kill them both, he simply found it too difficult to resist his natural instincts. Investment figures published monthly for both shares and unit trusts can easily place investors in the scorpion’s position. It’s in our nature to want to choose last year’s winners for our future portfolio, but historically it’s been proven…

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Finweek - English (Digital) - 1 Issue, 02-nov-17

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