Brett Arends: How Investors Lose 2/3rds of Their Profits

By on August 14, 2013

Mutual Funds - Inflows and CostsIn a recent article at MarketWatch, financial writer Brett Arends wonders, “Will Mom and Pop Investors Blow it Again?”

Arends cites the latest statistics from the Dalbar study of investor behavior:

For example, over the 20 years through the end of 2012, Standard & Poor’s 500-stock index produced an annual return of 8.21%. So if you’d invested $100,000 20 years ago and then gone away to a desert island, when you returned you’d find you’d get back your original $100,000 investment, plus a profit of $384,000.

However, over the same period, the average mutual-fund investor — Mom and Pop — didn’t do nearly so well, precisely because they kept buying after stocks had risen and then selling again after they had fallen. Their average return over that period, says Dalbar, was only 4.25% a year. At the end of the period, they would have gotten back their original $100,000 investment plus a profit of just $130,000.

Source: Marketwatch

One Comment

  1. Manservant Cheng

    August 15, 2013 at 1:39 pm

    Not surprising the unwashed have begin placing their mattress money in stocks at the highs.

    From the article:

    ‘According to the Investment Company Institute, the Great American Public has poured $92 billion into the stock market via stock mutual funds since the start of the year.’

    Isn’t this the way it always is?

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>