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Searching for skilled investment expertise when selecting a mutual fund manager is counter intuitive. As a result, investors' logic when choosing mutual funds is awed. In theory, investors should determine their target rate of return and then develop an investment plan to get that return. That is the theory ­ but not the reality. Investors want to win. When purchasing mutual funds that invest in stocks, winning usually means achieving a return greater than the market. In the eyes of the investor, investing and the desire to be successful, are no different than other examples in life. Usain Bolt is the fastest human in the world and has been winning sprint races for years. He has a skill that provides repeatable results so we can reasonably expect him to win every race. If one of several school-age children continuously gets the best grades, you can be fairly certain that pattern will continue. However, sometimes an outcome is repeatable and sometimes it isn't. Occasionally, it is a result of chance. If you tried your luck at the casino's roulette wheel and won, do you think you could repeat that win on your next spin? Is that a repeatable skill on which you should continuously bet heavily? Everyone understands their gambling victories are chance results. There is no way anyone should bet heavily because they Let go of the past ­ it doesn't predict future performance Dollars & Sense Peter Watson Guest Contributor 19 | Thursday, November 14, 2013 | OAKVILLE BEAVER | www.insideHALTON.com think they have the magic touch to win again on the next spin. We, as investors, have to determine whether successful investing is de ned as a mutual fund manager who beats the market one year and did so because of a either a repeatable skill or chance. Overwhelming evidence shows that people think a one-year victory in the stock market is a repeatable skill. Mutual fund managers who perform well one year get the most new investment contributions the following year. Those who perform poorly one year get fewer new investment contributions the next year. The tendency of investors to invest with last year's winners demonstrates the belief that investing success one year will translate into continued success the next year. That is totally incorrect. The evidence of tracking mutual fund managers' performance shows past performance ­ whether good or bad ­ in no way predicts future investment performance re- sults. People make investing mistakes and buy based on past performance despite investment warnings that speci cally inform investors that past performance is not necessarily indicative of future returns. That is an investment industry regulatory requirement so investors are fairly warned. The reason for the warning is because it is true. Past results should not be used as a prediction on future results. The logical question is what criteria do you have in making investment decisions if you should not rely on past performance? There are many different qualities you can use when selecting a mutual fund manager. A mutual fund manager can be selected because of quali cations and experience. You do not have any clear indication at predicting success so it is important to spread your risk and diversify. Invest in several funds. Our recommendation is to avoid the normal trap of thinking the important decision of choosing the correct mutual fund can be done by just relying on past performance. It may seem intuitive, however, the evidence does not support that approach. -Submitted by Peter Watson, MBA, CFP , R.F .P ., CIM, FCSI., Certi ed Financial Planner www.botg.ca Directed & Adapted by Chantal Forde Tickets: Adults $20 / Children $15 December 28-30, 2013 Proud Member of 905.815.2121 or oakvillecentre.ca Last chance 2013 sell down event YOUR 2013 S60 T6 EQUIPPED WITH: · 300 hp turbocharged 6 cyl. engine · AWD with Instant TractionTM · Volvo City Safety with full auto brake · Leather seating surfaces · Power glass moonroof · Power seats HURRY, OFFER ENDS DECEMBER 2ND VO LVO CAR E F R E E COVE RAG E N O C H A R G E SCHEDULED MAINTENANCE + WARRANTY + ROADSIDE ASSISTANCE + WEAR & TEAR VOLVO OF OAKVILLE 770 Pacific Road, Oakville 1-888-287-5031 www.volvoofoakville.com $ Cash Bonus on remaining 2013 S60 T6* 9,000 Earn 50,000 Aeroplan ® Miles with purchase or finance** *Limited time offer through participating Volvo Retailers to qualified retail customers only. $9,000 cash purchase incentive, including $1,500 retailer participation, available on any new 2013 S60 T6 and will be deducted from the negotiated selling price of the vehicle before taxes. $7,000 cash purchase incentive, including $1,500 retailer participation, available on any new 2013 S60 T5 and will be deducted from the negotiated selling price of the vehicle before taxes. 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