Private Investor Underperformance

Posted by Mike H on 23 September 2016 | Comments

Getting half the index is the norm

Do you know your returns? Do you have a bench mark you compare them with?

If you do not keep detailed records of all your transactions and costs each year, you may well be involved in a very expensive delusion.

From  an article in Investopedia:

“Lou Harvey at Dalbar’s behavioral studies show that over a 20-year period ending last year,

  •  the overall return for the S&P 500 index was 8.19% a year
  •  individual investors managed to earn just 4.2% a year.”

Actively managed funds I would imagine, on average, probably have returned 6-7 % return a year.

Previous studies showed even poorer performance of investors (~2 % ) in the 1980s ( possible due  in part to much higher trading costs ) That is why managed funds boomed . All they had to do was outperform the average investor and not today’s index funds.

It seems times have changed but not human nature.

The rest of the article offers some of the reasons on why we tend to underperform

 

: Investing: It’s Just a Matter of Getting Out of Your Own Way | Investopedia http://www.investopedia.com/news/investing-its-just-matter-getting-out-your-own-way-0/#ixzz4KwVqBSkW

 

Regards

Mike H

"The views expressed here are the views of individual contributors and in no way should be construed to represent of the AIA, the Board, employees or volunteers. The AIA does not provide advice or recommend products or strategies. Readers should obtain professional advice before acting on any information provided in this Blog".