In a recent press release, Lou Harvey, President of DALBAR, said,
For 15 years, QAIB has shown that investor returns lag what performance reports and prospectuses would lead one to believe is acheivable. While those returns are, in fact, theoretically acheivable, the reality is that investors are not rational, and make buy and sell decisions at the worst possible moments.
2008, like all the over years shows investors losing more than the market. Last year (2008) equity fund investors lost 41.6% and the S&P 500 lost 37.7%.
DALBAR included in their report that investors guessed market directions right 42% of the time by buying low and selling high. That means that 58% of the time investors bought high and sold low. For example most investors sold after the September melt down, realizing their losses.
So everyone involved had a bad year last year but the key thing to point out is that the people who paid for it (mutual fund investors) did worse than those that could have just bought the S&P 500 index. Some mutual did do better than others but what DALBAR points out is that the average investor did worst by investing in mutual funds compared to the old S&P 500 which cannot avoid or side step anything like mutual fund managers can.
What this data says to us is that investors are far better off
To correct some of these investor behaviors that lead to this underperformance, DALBAR suggests
For more information about the study, click here.
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