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Private Investor Underperformance
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
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