Relative Performance

Shrimp_Stu

Please can someone tell me/explain whether you consider the below relative performance stream to be good or bad - as I am trying to figure out relative performance when it comes to looking at unit trusts I might want to purchase
Thanks
SJ

Year1 +50%
Year2 -50%
Year3 -20%

ReportInvestor

Hi SJ

What sector does the fund belong to e.g. UK equity income? You can only compare like with like.
What date do your figures go up to?

Shrimp_Stu

RP
It is a purely hypothetical(sp?) question for research purposes only and is not geared towards any sector/country or specific dates in time.

Milarky

The obvious point to make is that buying shares in the same company regularly removes some the 'bad' with any of the 'good' - you simply 'average' out. Investing is supposed to be for longer on average than other activities. If you had £100,000 to put into a share [and it would be portfolio approach, anyway, I imagine] you could do that in economically [i.e. cost] effective chunks over time, rather than all at once.

They often say that past performance is no guide to the future, but I'd assume that needs to be modified when the share in question is going all over the place - as is yours. For volatility read 'risk'. The past performance in this case should be a sign of warning rather than opportunity i]"my share's really cheap, it has to go up!"[/i

cheerfulcat

Shrimpers_Joy wrote:

Please can someone tell me/explain whether you consider the below relative performance stream to be good or bad - as I am trying to figure out relative performance when it comes to looking at unit trusts I might want to purchase
Thanks
SJ

Year1 +50%
Year2 -50%
Year3 -20%

Hi, SJ,

It's impossible to judge *relative* performance without some sort of benchmark. How have comparable unit trusts performed? What is the relevant index?

Slim

It is unclear whether we are now in year 0 or year 4 ie whether the relative performance of the last 12 months is plus 50% or minus 20%. Assuming the relative performance of the past year is plus 50% then all that can be said is -

Over one year the relative performance is good.

Over a two year period it is impossible to work out the cumulative relative performance without having the average actual performances to use to weight the plus 50 and minus 50 relative performances. Eg if the average actual performance in one of the years is very low ie no gain or loss then a plus 50 or minus 50 relative performance it that year would also be small.

Over a three year period - ditto