Strong recent returns can be misleading
A top-performing fund may have done well because its market, style or sector had a very strong period. That does not mean the same conditions will continue.
By the time a fund appears near the top of a performance table, many investors are seeing the result after the good period has already happened.
Some funds also reach the top by taking more risk. That can look excellent in rising markets and painful when conditions change.
This does not mean top-performing funds should be ignored. It means they need context. You need to understand why they performed well and whether that fits your pension plan.
Better questions
- What drove the strong return?
- Was the fund taking more risk?
- How did it perform in weaker markets?
- Is it still suitable after the rise?
- Would you hold it through a bad period?