According to many financial analysts, one of the worst things an investors can do is “chase returns,” or put money into strategies that have been working, rather than looking for parts of the market that may be poised to outperform going forward. From a purely contrarian point of view, given the market’s general cyclicality, should investors make things easy on themselves by simply ignoring the parts of the stock market that others have been chasing returns in, and instead focus on the areas they’ve been abandoning? In a word—yes. That conclusion is based on Morningstar’s “Buy the Unloved” strategy, which has demonstrated remarkable results ever since it was introduced in 1994. In the strategy, an individual would invest in the three equity-fund categories that saw the largest outflows over the previous calendar year. They would also avoid the most “loved” categories of the previous year, or the groups with the largest inflows. The strategy assumes a three-year holding period, with rebalancing at the end of each period.via