Investopedia

Continue to Site »

Survivorship Bias Risk

Filed Under » , ,
Dictionary Says

Definition of 'Survivorship Bias Risk'

The possibility that an investor will make a misguided investment decision based on published investment fund return data that are unrealistically high because a company's poorly performing funds are closed and their returns are not included in the data. The danger is that the investor will not achieve the returns he anticipates because he has based his decision on incomplete and misleading information.
Investopedia Says

Investopedia explains 'Survivorship Bias Risk'

Survivorship bias risk is one of many reasons why investors should not rely too heavily on past returns to make their investment decisions. Other types of risk that investors might encounter are non-reporting bias risk (the danger that overall returns are misstated because some funds, likely the poorly performing ones, decline to report their returns) and instant history bias risk (the possibility that fund managers may choose to report performances to the public only when they have established a track record of success with a fund, while leaving out unsuccessful funds). In addition to past performance, investors should consider factors such as cost, risk, after-tax returns, volatility, relationship to benchmark performance and more.

Articles Of Interest

  1.

    4 Strategies For Managing A Portfolio Of Mutual Funds

    Discover some common strategies to devise a plan and maintain your holdings to reflect it.

  2. Introduction To Investment Diversification

    Reducing risk and increasing returns in your portfolio is all about finding the right balance.

  3. When To Sell A Mutual Fund

    Unhappy with your mutual fund's returns and thinking of investing elsewhere? Read this article first.

  4. How To Pick A Good Mutual Fund

    Learn how to evaluate mutual funds and find the right one for you.

  5. 5 Ways To Measure Mutual Fund Risk

    These statistical measurements highlight how to mitigate risk and increase rewards.

  6. Why It Pays To Be A Lazy Investor

    Be a couch potato! This passive, but diversified, investing strategy could be for you.

  7. Pick The Winners At The Mutual Fund Track!

    For both mutual funds and racehorses, there's no surefire way to pick a winner.

  8. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.

  9. Financial Career Options For Professionals

    Find out if spreading your wings to try a new career will make you soar or fall flat.

  10. Women: Invest In Your Financial Literacy

    Learning about money may seem intimidating, but it's not as hard as it looks.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  2. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  3. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  4. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  5. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  6. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.
Trading Center