Market Timing Costs Investors Big: Dalbar
From: thinkadvisor.com
Dalbar’s annual study of investor behavior shows that self-directed investors work against themselves largely by chasing the market
Investors are their own worst enemy, or so is the conclusion of Dalbar’s 22nd annual Quantitative Analysis of Investor Behavior study that compared equity fund returns of directed investments versus the market benchmark. This year’s study found that in 2015, investors returns came in at -2.28% for equity funds while the S&P 500 benchmark had incremental gains of 1.38%, thus the average equity investor underperformed the S&P 500 by 3.66 percentage points. The good news is that’s better than 2014, in which investors left 8.19 percentage points on the table.
The bad behavior wasn’t limited to equity funds, Dalbar found. Those selecting asset allocation funds had returns of -3.48% (vs. the 1.38% S&P 500), and fixed income funds had -3.11% returns, versus the Barclays Aggregate Bond Index return at .55%. Bottom line: “Investment results are more dependent on investor behavior than on fund performance,” Dalbar concludes. “Mutual fund investors who hold on to their investments have been more successful than those who try to time the market.”
