Chasing Performance Is a Fool's Game
Davis found that 96% the top quartile had spent at least one three-year period during the decade in the bottom-half of performance rankings, 79% had spent at least three years in the bottom quartile and 47% had spent at least three years in the bottom 10%.
Unfortunately for these institutions, the loser who just lost their business typically then becomes the winner, while the recipient of the reallocated funds suddenly gets clobbered.
This dismal performance largely stemmed from the fact that most investors sell their holdings when the market falls and they get scared, and then they buy back into the market when it's roaring and stocks are expensive. As I've written before numerous times in this space, this is exactly the opposite of what investors should be doing, but it's human nature.
As you can see, chasing performance as an investor is a failed strategy. That's why it's important for investors to make well-informed, intelligent decisions in the first place on how they invest their money, whether they're choosing a professional to do it for them or they're trying to do it themselves.
If that initial decision is made poorly, then a change is probably wise. If, however, the initial decision was a good one, then it's absolutely crucial that investors refrain from being spooked by a slump.
Investing in the stock market is a marathon, not a sprint. Those who take a short-sighted approach to stocks are bound to lose.
It doesn't help that many quarters of the financial media will tell people otherwise, blaring headlines that tout get-rich-quick schemes. Wall Street, for its part, isn't always a beacon of truthfulness either. The media is trying to get your attention to boost its advertising reach, and Wall Street is trying to sell you its products.