Investor Returns vs Market Returns 

DALBAR, Inc.‘s 2021 investor behavior study 📊 painted a very sad but vivid picture 🖼️ of the equity fund investor’s journey over the last two decades. Despite the S&P 500 (a trusted barometer of the U.S stock market) enjoying an annualized return of 7.43%, the average equity fund investor 🕴️ only saw a return of 5.96%. This 1.5% gap 📉 might appear trivial at first glance, but over a span of 20 years, it morphs into a significant financial gap that separates your current financial status 👛 from your potential one 💰.

So, the question – what’s fueling this underperformance?

Imagine a stampede 🐃, where everyone is in a frenzy, taking the cue from their neighbors – panicking when a volatile market is afoot 👣or eagerly jumping aboard when a stock or mutual fund 💹 is having its moment in the sun. These investors are often stricken with a severe case of FOMO (fear of missing out) 😱, which fuels their decisions, taking them further away from their financial objectives.

Some investors fancy themselves as fortune tellers 🔮, with a knack for predicting a market’s upswing and downturn. However, these self-professed fortune tellers are often left nursing their losses while the market moves onwards. It’s not just fear, it’s also greed 💸, impatience 😤, and other emotions that misguide these investors in their strategic investment journey.

The renowned investment research firm, Morningstar⭐, in their “Mind the Gap” report, also highlighted this financial misfortune. Their diagnosis? Investors’ ill-advised decisions to tactically bob and weave through the market, rather than strategically holding their ground. Their recklessness in buying and selling fund shares at the wrong time cost them almost a sixth of their returns they could have earned simply by exercising patience 😌 and pursuing a buy-and-hold strategy.

Share your thoughts, experiences, insights, or even a simple takeaway from this post in the comments below. Looking forward to hearing from you all! 💭🗯️💡