5 Funds Whose Trailing Returns Don't Tell the Whole Story

A version of this article was published in the April 2016 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor here.

Trailing returns serve as a useful tool to compare a fund’s performance with its benchmark or peer group. However, the measure often disguises how volatile a fund has been during a longer time frame. That’s especially true when a fund has recently turned in very strong or poor performance, which can bias its trailing returns.

On March 9, 2016, the U.S. equity bull market celebrated its seven-year anniversary. Many funds that struggled during the credit crisis have excelled during the rally and now boast excellent trailing returns relative to their Morningstar Category peers. Investors should keep in mind that these funds’ trailing returns don’t tell the whole story.

We’ve gathered funds from the Morningstar 500 that had bottom-quintile showings during the credit crisis yet boast top-quartile returns during the trailing three-, five-, and 10-year periods through March 2016. All of the funds represent strong long-term options. However, they require patience; each fund receives a Morningstar Risk rating of High or Above Average.

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