You Chase – You Lose!
About This Episode
“Past performance is not indicative of future results.”
It’s a common phrase that you’ll see on a lot of investment material but its implications are often missed by investors.
Chasing performance is what happens when you see a stock or sector performing well or other investors reaping big rewards so you decide to buy in at the high levels. It’s not at all a new phenomenon as there are always stocks with new and exciting stories inducing the fear of missing out.
In this episode, Marcelo and Keith explore what chasing performance looks like, examples from the last two years that have trapped investors and destroyed capital, why many investors end up chasing performance, why money-weighted returns are important and how to avoid chasing performance.
Thank you for listening!
Key Topics:
- Introducing today’s topic (1:58)
- Why many investors are pulled towards chasing performance (3:04)
- What it means to chase performance (4:04)
- Why it’s important to share real-world stories about the impact of chasing performance (5:51)
- The emotional pull towards exciting narratives and being part of a successful group (7:03)
- The amplifying effect of social media (8:00)
- Why chasing is dangerous for your portfolio (9:53)
- The declining performance of disruptive technology stocks over the past 18 months (10:38)
- How strong narratives are reflected in the stock prices for certain sectors (12:10)
- Comparing the performance of blue-chip stocks and disruptive securities (15:46)
- The disappointing journey of marijuana stocks in Canada (18:03)
- Chasing performance in the 1990s (21:25)
- The effectiveness of diversifying with The ARK Innovation ETF (22:48)
- Why you need to understand money-weighted returns (25:05)
- The problem with a “core and explore” portfolio strategy (27:00)
- How Sir Isaac Newton lost his fortune chasing performance in the early 1700s (27:53)
- Strategies you can use to avoid the lure of chasing performance (31:21)
- And much more!
Meet your hosts
Keith Matthews
Partner & Portfolio Manager
Marcelo Taboada
Associate Portfolio Manager
Lawrence Greenberg
Associate Portfolio Manager
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