6. Objectivity Beats Subjectivity: Why Short-Term Performance Momentum Matters in Investing

You’ve likely heard the disclaimer, “Past performance does not guarantee future results.” This warning, required by law on every investment product, is wise to heed—but it doesn’t tell the full story.

While it’s true that long-term past performance shows little correlation with future success, this doesn’t apply in the same way to short-term performance. Choosing a mutual fund based solely on its past five or 10 years of returns is like predicting this year’s World Series winner based on the last decade’s records. Long-term achievements don’t guarantee future wins.

However, short-term performance often tells a different story. Just as the top-performing team this season is frequently the best bet for the championship, mutual funds with recent momentum can maintain their upward trend, at least in the near term. This principle of “momentum investing” forms a key part of SMI’s investment strategies, which use objective, data-driven measurements to identify trends and maximize potential returns.

The result? A straightforward, momentum-based approach that has consistently delivered outstanding results.