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Sufferers of Alfred Hitchcock syndrome
frequently invest by looking out the (ahem) "rear window"
instead of at the road ahead. In advanced stages, sufferers
of this syndrome may also exhibit religious delusions,
as they begin to worship at the "Church of What's
Working Now." This is dangerous, because what's
working now has a way of not working for very long.
These investors, therefore, run the risk of buying into
asset classes after most of the money has already been
made.
Case in point: The top mutual funds in
1999 were Internet and Japanese small-cap funds. And
investors flocked to them in droves. As the year drew
to a close, Jim Callinan, portfolio manager of RS Emerging
Growth, won Morningstar's top honors as fund manager
of the year, with a stunning 183 percent return on the
strength of then red-hot Internet business-to-business
plays. Callinan made the cover of investment magazines
everywhere, and investors, suffering from the throes
of Alfred Hitchcock syndrome in its then-terminal phase,
piled into the fund, based solely on his accomplishments
of the previous two years. The rear window was enticing,
indeed.
Within weeks, the stocks in Callinan's
portfolio began to hemorrhage value: The fund lost 25
percent in 2000, 27 percent in 2001 and then 40 percent
in 2002. Callinan's returns, relative to aggressive
growth peers, were in the bottom 15 percent of his category
in each of those three years. The fund has still not
caught up to its 1999 peak. Everyone who bought the
fund half a decade ago on the strength of short-term
results has lost money. Such is the destructive power
of Alfred Hitchcock syndrome.
Treatment:
To combat Alfred Hitchcock syndrome, ask yourself some
questions concerning your portfolio.
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Ask yourself these questions: |
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"I usually walk people through market history," says
Margaret Starner, a financial adviser in Coral Gables,
Fla.
Her advice: Remember the big picture. Things that looked
good last year are unlikely to continue their outperformance.
Diversify.
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