Survivorship Bias

Judging performance by the survivors while ignoring the failures that vanished.

Survivorship bias is the error of drawing conclusions only from what survived. Mutual fund families quietly close their losers, so the average return of funds that still exist overstates what investors actually earned. The classic illustration comes from WWII statistician Abraham Wald: armor shouldn't go where returning bombers showed bullet holes, but where they showed none — planes hit in those spots never made it home. In investing, every backtest and every 'study of winning stocks' must be checked for the graveyard it ignores.

The fund ranking suffered from survivorship bias because the dozens of funds that closed after losses were excluded.