Give new managers and funds time to prove themselves before investing with them. With the thousands of funds and fund managers in the investing universe that have track records of at least three years, why invest in an untried fund or manager?
While finding funds that will be top performers in their category before the fact is daunting, avoiding disastrous fund investments is within reach. But it requires something upon which to base a judgment. At least a three-year performance history that can be compared to the performance of funds with similar investment objectives and assumed risk is indispensable to evaluate a fund manager or a fund.
Consistently favorable performance relative to a peer group of funds over different market environments provides no guarantees of future performance, but it is infinitely better than nothing. You would be surprised at how many new funds are quietly buried and new fund managers transferred after the first few disappointing years.
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