I read this tidbit in the Boston Globe this past weekend:
“Dalbar Inc., a Boston-based financial services research firm, has been measuring the effects of investors’ decisions to buy, sell, and switch into and out of mutual funds since 1984. The key finding always has been that the average investor earns significantly less than the return reported by their funds. (For the 20 years ended Dec. 31, 2006, the average stock fund investor earned a paltry 4.3 average annual compounded return compared to 11.8 percent for the Standard & Poor’s 500 index.)” and it helped to reinforce my belief in “Buy and Hold” and “Don’t Panic“. There are the never ending debates on managed funds vs. index funds, and how much to pay an advisor, but when the data show that the average investor has actually lagged the market by 7.5% per year, something is terribly wrong. In these 20 years, $10,000 in the S&P would increase to $93,075. Investing in a low cost (I use a cost of .18% for this math) fund would yield $90,124. But the average investor has seen his $10K grow to only $42,478.