ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Investors can be confidently predict future returns on an investment by studying its past performance. An investment that has earned a high rate of return over the last 5 years will not necessarily continue to perform well in the future.

Detailed explanation-2: -"Past performance is no guarantee of future results” is generally treated as a warning label: Don’t assume an investment will continue to do well in the future simply because it’s done well in the past. “Past performance is no guarantee of future results."

Detailed explanation-3: -It’s not uncommon for a fund to have better-than-average performance one year and mediocre or below-average performance the following year. That’s why the SEC requires funds to tell investors that a fund’s past performance does not necessarily predict future results.

Detailed explanation-4: -New research shows that the ‘Past performance does not guarantee future results’ disclaimer does not lead to good investment decisions.

Detailed explanation-5: -Because investing is oriented toward the potential for future growth or income, there is always a certain level of risk associated with an investment. An investment may not generate any income, or may actually lose value over time. For example, a company you invest in may go bankrupt.