Lou Harvey, "investors are not rational, and make buy and sell decisions at the worst possible moments"

By on June 11, 2009

Mebane Faber, at World Beta, posts the latest results of the Dalbar study, which examines the performance of mutual fund investors.

The sad facts:

  • For the 20 years ended December 31, 2008, equity, fixed income and asset allocation fund investors had average annual returns of 1.87%, 0.77% and 1.67%, respectively. The inflation rate averaged 2.89% over that same time period.
  • Equity fund investors lost 41.6% last year, compared with 37.7% for the S&P 500 Index.
  • Bond fund investors lost 11.7% last year, versus a gain of 5.2% for the Barclays Aggregate Bond Index. This disparity is largely due to the underperformance of managed bond funds caused by mortgage-backed securities.
  • With an annual loss of 30% last year, asset allocation fund investors fared better than equity fund investors.

Sources:

http://www.mebanefaber.com/2009/06/09/people-suck-at-investing/

http://www.qaib.com/showresource.aspx?URI=advisoreditionfreelook&Type=FreeLook
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