Quora Answer: Is a Fund with 17% Return Realistic?

The following is my answer to a Quora question: “Is a fund with 17% return rate realistic?  I want to invest my money in one called Fundsmith, but it seems too good to be true.”

I assume here that we are talking 17% since inception, which is a more realistic number than 17% per annum.  If it is 17% since inception, and that inception was a decade ago, for example, you are looking at 1.7% per annum non-compounded, which is a terrible return.  These numbers without context make it impossible to give a reasonable response since we are speculating.

If it is 17% per annum, we are looking at a hedge fund of sorts, and while high risk, they are also not cheap.  Hedge funds tend to have extremely high entry barriers.  They are not offered to retail investors.  In any case, if you smell that something is too good to be true, it likely is, and you would do well to heed your instinct.