In 2015, stock market leadership centered primarily on high-priced aggressive growth stocks.
How quickly things have changed. Many aggressive growth stocks have tumbled in 2016. Small cap biotechnology stocks, which had climbed nearly 300% from 2010 through 2015, have declined 47% from their highs last July.
The multiyear performance advantage accumulated by aggressive growth stocks and mutual funds has been erased in many cases.
The turnabout is a reminder that chasing high-flying, high-priced stocks often ends poorly. That is not to say it is easy to ignore the siren song of these stocks; the fear of missing out can be powerful.
Likewise, the decline in these stocks should remind investors that promising companies may not enjoy good stock price performance if they are purchased at a high price.
Market dynamics can change quickly. Rather than chasing high-flying stocks, investors should look to buy good companies at attractive prices.