pastperformance

Past performance refers to historical results achieved by an investment, strategy, fund, or individual, often used to gauge track records and inform future expectations. It is descriptive rather than predictive, and is not a guarantee of future results.

Performance is typically measured using returns over specified periods, such as annualized or cumulative returns, including income and capital gains. Common methods include time-weighted returns, which neutralize cash flows, and money-weighted returns, which reflect actual investor timing. Additional metrics may include volatility, drawdown, and benchmark-relative performance.

In practice, past performance is used to compare funds or managers, assess consistency, and aid investors in selecting strategies aligned with risk tolerance and objectives. Performance data is frequently presented with benchmarks, peer comparisons, and risk indicators. Marketing materials may highlight favorable results, but are often accompanied by disclosures about limitations and assumptions.

However, reliance on past performance has notable limitations. It can be distorted by survivorship bias, backfill, and selection bias, and may reflect favorable market conditions or one-off events rather than skill. Returns are affected by fees, taxes, liquidity constraints, and changes in portfolio holdings, all of which may not be reproduced going forward. The length and window of performance data can also influence impressions of consistency or skill.

Related concepts include risk-adjusted metrics (such as the Sharpe ratio and alpha), tracking error, and performance attribution, which seek to separate skill from market movement and identify sources of return. Overall, past performance provides context but should be interpreted cautiously and in conjunction with risk, fees, and forward-looking factors.