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Millionaire Now! by Larry NusbaumThis blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth". |
Investor Returns Reveal Poor Habits
Investors are holding on to their mutual funds longer than at any other time.
That should prove a big plus for those with long-term retirement goals, say fund analysts.
Consider that in the late '80s, the average investor held his fund for 1.7 years. Now, it's up to 4.3 years, says market researcher Dalbar.
"These last two years have seen the lowest turnover rate in funds on record," said Louis Harvey, Dalbar's president.
In the past 20 years, stock funds produced an average annual investor return of about 4%. "If you would have just bought an S&P 500 index fund and held on to it the whole time, you would have made almost 12% a year," Harvey said.
Applying a $10,000 investment to data in the accompanying graphic, bad timing caused investors in small-cap stock funds the past five years to leave $1,133 on the table.
Please keep another point in mind when analyzing returns over time: According to the Frank Russell and Co, the “manager of managers”, the S&P 500 (10.2%) and the average fund manager (12.2%) has outperformed the average investor (2.7%) over the past 30 years. Why? Because, individuals who handle their own accounts tend to make too many moves and at the wrong time greatly retarding long-term performance. The point being that unless you own managed funds or index funds, you will not achieve any where close to the returns used in research reports comparing stock market returns to other asset class returns over a long period of time.
Also, according to studies by DALBAR, the majority of investors put their money into mutual funds when markets are relatively high, and either sell or stop investing when markets are low. Intellectually we know that’s backwards but emotions are much stronger than our intellect. Dalbar’s long term studies indicate that the average investor makes about 60% less than the market. And much of that difference is the result of wanting to find somewhere safe to invest when the market goes down.
- How (bad) Certain Investments Did Last Week
- Dow Dips Below 8,000 Threshold, Reaching April 2003 Levels
- Some Insight From The Blogs:
- Canslim.net Morning Comment And Links (for Traders)
- Stocks Fail To Turn Up; Sec's Shorting Ban On Financial Shares Expires
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- Millionaire Now!
- The 7 Steps to Millionaire Now!
- Build Your Financial Plan
- RETIRE RICH: Survival Guide
- ASSET ALLOCATION MODEL
- THE BIG ROLLOVER IS HERE
- THE END OF THE GRAND SUPERCYCLE?
Today we have the Fed speaking and release of Fed mi [read more]
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