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Mark Hulbert: Harvard teaches investors a lesson in what not to do

CHAPEL HILL, N.C. (MarketWatch) — Don’t fire your investment manager just because he failed to beat the stock market last year.

I can already hear the howls of protest: If trailing the market isn’t a fireable offense, then what is?

My answer: It’s not that past performance doesn’t count; what’s irrelevant is performance over the recent past. Calendar-year performance, for example, tells you next to nothing about whether your manager is a good bet for future returns.

This is an exceedingly difficult lesson for us to take to heart. Even Harvard University, with the largest endowment fund in the world, apparently is having trouble with it.

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