Performance Chasers Exit

U.S. stocks got off to the worst start ever in 2016 and high beta stocks got absolutely obliterated, falling 21% in the first 28 trading days of the year. High beta’s counterpart, low volatility stocks provided investors with some protection as they fell just under 5%.

LOW VOL WORST START

And interest followed performance…

 

LOW VOL TRENDS

And assets weren’t far behind…

 

low vol

But then the worst start to a year was forgotten, and these stocks would underperform by 24% over the next 6 months…

SPHB BOTTOM

And then, same as it ever was, people who chased performance fled for the same reason (h/t Eric Balchunas)

fiss

And in the end, it was all for nothing. They’re basically at the same exact place year-to-date.

LOW VOL YTD

ETFs are great. They’re tax efficient, trade throughout the day, and give investors access to virtually any slice of the market. But it won’t change the fact that money will always be invested using the rear-view mirror. The behavior gap is alive and well and ETFs, index funds nor anything else will ever close it.

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