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.

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.