Consistency does not mean no bad years
A consistent fund is not a fund that goes up in a straight line. Most real investment funds will have weak periods, especially if they hold shares or bonds.
Consistency is more about whether the fund behaves broadly as expected. A cautious fund should not regularly act like a high-risk equity fund. A growth fund should be judged over a suitable long-term period.
When reviewing consistency, compare the fund with similar funds and with its own objective. A fund can be consistent even if it has a negative year during a difficult market.
The aim is to understand the pattern. Does the fund deliver its role across different conditions, or does it rely on one unusual period to look good?
How to judge it
- Look across several time periods.
- Compare with similar funds.
- Check drawdowns as well as returns.
- Ask whether the fund matched its objective.
- Avoid expecting smooth returns from growth assets.