So does past performance really matter?

The phrase “past performance is not an indicator of future outcomes” (or some 
variation thereof) can be found in the fine print of most mutual fund literature. 
Yet due to either force of habit or conviction, investors and advisors consider 
past performance and related metrics to be important factors in fund selection.  
So does past performance really matter?

 Very few funds manage to consistently stay at the top.  Of the 707 funds that were in the top quartile as of 
September 2010, only 10% were still in the top quartile at the end of September 2012.
 For the three years ending September 2012, 23.60% of large-cap funds, 15.49% of mid-cap funds and 29.37% of 
small-cap funds maintained a top-half ranking over three consecutive 12-month periods.  Random expectations 
would suggest a rate of 25%.
 Looking at longer-term performance, only 5.16% of large-cap funds, 3.21% of mid-cap funds and 5.10% of smallcap funds maintained a top-half performance over five consecutive 12-month periods.  Random expectations 
would suggest a repeat rate of 6.25%. 
 While top-quartile and top-half repeat rates have been at or below the levels one expects based on chance, there 
is consistency in the death rate of bottom-quartile funds.  Across all market cap categories and all periods 
studied, fourth-quartile funds had a much higher rate of being merged and liquidated.  [link]