Why past returns promise nothing
· beginner
Automated material · TradeAlmanac editorial deskDraft prepared by a language model from our stored data; not reviewed by an editor.
The phrase "past performance does not guarantee future results" sits under every chart and reads as a legal formality. It describes a specific mechanism.
Three reasons
First: part of any past result is chance. Out of a large number of participants some will show an excellent result purely by distribution, and telling them from the skilful ones over one period is impossible — Survivorship bias: why success statistics mislead.
Second: conditions change. A strategy that worked with cheap money behaves differently when money is expensive — The key rate: how a Bank of Russia decision reaches your portfolio.
Third: a successful approach attracts capital, and capital reduces the approach's returns. An opportunity everyone has heard about stops being an opportunity.
What can still be extracted from the past
Behaviour under stress: how an instrument behaved in previous crises — Crises of the Russian market: how they differed.
The stability of costs: a fee is predictable, unlike returns — Fees: small numbers that decide the outcome.
Process discipline: whether the manager stuck to the stated strategy.
How to compare honestly
Against a benchmark, over several years, and accounting for the risk taken — The benchmark: what to compare your result against honestly.
Related instruments
Draft prepared by a language model from our stored data; not reviewed by an editor.
Model: claude-opus-5
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