It is important to keep in mind that performance is based on historical results and is not intended to project future performance of a fund. Ensure that the fund's objectives as well as the manager's investment style and strategy are aligned with yours.
While yesterday's data is no guarantee of future performance, the long-term track record is a useful barometer of the manager's skill and expertise in managing different market cycles.
When comparing funds, it is best to focus on long-term performance because financial markets (and the economy) tend to go through cycles that can last for several years. For instance, small-company stocks (and funds) will at times outperform large-company stocks (and funds).
At other times, the large-company stocks/funds will be the star performers. A common mistake investors make is to constantly "chase" the best-performing funds from the recent past. Unfortunately, last year's "hot" sector of the financial market may be replaced this year by a different sector.
As historical data is never perfect, the additional information paves the way for investors to make more informed investment decisions. They should also remember that a top or winning fund may not necessarily be the most suitable fund for them.
If you are comparing the performance of several funds, be sure that you are making accurate comparisons: compare fund with the same investment objectives and fund policies before looking at the numbers.
The value of investment may fall as well as rise and investors may/may not get back the amount originally invested. Changes in the currency exchange rates may cause the value of the investment to increase or diminish if you are investing in an offshore fund.