Video – Can Investors Successfully Chase Performance of the Biggest Stocks?

We often see a tendency for investors to think that the current trends or top performing companies will continue on the same path indefinitely.  The data shows that trends change, sometimes very abruptly, and the top performance companies do not stay at the top indefinitely.  This short video shows the performance of the top stocks in the 10, 5, and 3 year periods prior to joining the top 10 largest stock list and the subsequent 3, 5 and 10 year performance of the same stocks.  What we see is that in the periods directly following a company cracking the list of the top 10 largest US companies the average performance does not coincide with those prior periods.  The main takeaway from this video should be that while it is very tempting to believe that certain companies that are doing very well will continue that performance in perpetuity, that is not what we see in the data and it still makes sense not to chase performance and to instead maintain an appropriate asset allocation and stay diversified.