http://en.wikipedia.org/wiki/Pygmalion_effect
The thing is, teachers don't actually group kids by ability. Even if they really try, the only criteria teachers are able to uphold is their own arbitrary and whimsical personal preferences. It's a blind bet, that's it. Once you accept that teachers group kids by ability, you are giving a blank check for him to play favourites with their pet students, and doom the kids they didn't pick to a life of lower expectations and not having access to opportunities they might actually be able to take advantage of, more than the so called smarter kids.
I'm talking from personal experience. When I was a kid, I started by being the smart kid who didn't applied myself. Then, around 7th grade the teachers downgraded me to the loser kid who was never going to amount to nothing in life. Between 12 to around 17 was also the socially awkward nerd who didn't fit in school, and being in class with all those kids who were stranger to me led to a whole lot of anxiety, which forced me to prefer skipping school instead of attending class. As a result, my grades tanked, I started getting Fs, and I even flunked 10th grade.
The teachers didn't cared, because to them that was expected. They had divided the class in the fast-track group, the ones expected to go to college, become doctors and succeed in life, and the loser group, the ones doomed to failure and even not actually finish highschool. As I was placed in the latter group and expected that I would never amount to anything in life, they didn't gave a sh*t if I flunked a year or not. To them, that was expected, because I was placed in the loser group in the 7th grade.
Thankfully for me, in spite of the teachers segregating the students by their perceived potential for success, the national school system rejected that concept and gave all kids the same opportunities, in spite of any favoritism on behalf of the teacher body. Therefore, in spite of my social awkwardness (which I managed to outgrow), I was able to do well in national exams and in college admission tests.
This was a shock to my teachers, and this led to a heartbreaking and soul-crushing experience: after acing the national-wide math test (best performing kid in my highschool), which was completely unexpected by any of my teachers, I had the head teacher of my school summoning me for an interview essentially to try to get me to admit and confess I cheated on the test, because to him it was impossible for a kid not on the fast-track group to outperform his pet students. After all, my success in the national exams meant they screwed up, because it was proof their pet-picking policies marginalized talented kids, that kids could succeed without their magical guidance, and that their teaching skills were questionable (kids who were groomed by them were performing worse than marginalized kids). When they realized that I actually did study for the exam and my grade was actually based on nothing more than the work I put into it and some talent as well, the strangest thing happened: the head teacher of my school started telling me to my face that in spite of my grade I would never amount to anything in life and I was doomed to fail. That's what you get when you let teachers pick favorites.
Thankfully, I managed to enroll in college in mechanical engineering. That was a shock to my highschool teachers, as some of their pet students didn't even managed to get accepted themselves. At undergraduate level I was an average student, mostly because I've managed to grow a thicker skin and therefore avoided the whole socially awkward teen experience. Even then, I still felt compelled to skip classes and as a consequence fail some courses. In spite of that, when I enrolled in my masters I finally managed to pick subjects I was actually interested in (structural analysis and computational mechanics). The best part of it is that I finally got a teacher to actually believe in me, in spite of my limitations. That teacher happened to be my master's thesis counselor. He accepted me as a student in spite of my low grades, and he actually believed in me. As a consequence, I went from the kid on the bottom of the class to the best performing student in my graduation year, receiving the top marks in school in computational mechanics courses, and be awarded with a national prize for students in that field. Fast forward a couple of years, I'm now a research assistant in my country's (and one of the world's) top engineering schools, and I'm a member of an european research project in my field of expertise.
Now, I managed to have some academic success in spite of being side-tracked, and subsequently railroaded, by teachers who were firm believers in the "let's group students by ability" bullshit philosophy. But I was one of the lucky ones, who managed to avoid all the failure traps laid out by the teachers who placed bets on their pet students. But what about all the kids who weren't as lucky as me? I vividly remember a couple of kids I befriended in middle school who shared the same interests and social issues I had, who were smarter and who were more talented than me. They didn't managed to overcome the traps set out by those teachers, and ended up failing at life, vindicating the self-fulfilling prophecies of the "let's group students by ability" teachers. If they actually received the same opportunities as everyone, I believe they could easily outperform both me and the entire group teachers were grooming for success. But they didn't. And now they are stuck in menial, low income jobs.
So, please think about it.