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Stock Insight

Money MythBuster: Past performance guarantees results

The second episode in the new Morningstar series explains how there's a lot more to an investment's future than first meets the eye

Ruth Saldanha 4 June, 2019 | 5:00PM
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Mr. Morningstar Money Man: A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be. You know who said that? Wayne Gretzky. That's right. The great one. Just because a stock or fund has done well in the past, it does NOT necessarily mean it's going to do well in the future. Past performance is just one of the indicators than an investment is going to do well in the future. We use five pillars to predict what's going to do well in the future. Parent, People, Price, Process, Performance. Past performance is a good starting point, but is no a guarantee of future results! This myth is BUSTED.

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About Author

Ruth Saldanha

Ruth Saldanha  is Senior Editor at Morningstar.ca. Follow her on Twitter @KarishmaRuth.

 
 
 

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The Morningstar Star Rating for Stocks is assigned based on an analyst's estimate of a stocks fair value. It is projection/opinion and not a statement of fact. Morningstar assigns star ratings based on an analyst’s estimate of a stock's fair value. Four components drive the Star Rating: (1) our assessment of the firm’s economic moat, (2) our estimate of the stock’s fair value, (3) our uncertainty around that fair value estimate and (4) the current market price. This process culminates in a single-point star rating that is updated daily. A 5-star represents a belief that the stock is a good value at its current price; a 1-star stock isn't. If our base-case assumptions are true the market price will converge on our fair value estimate over time, generally within three years. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Morningstar Star Rating for Stocks, please visit here

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