No. of Recommendations: 0
It should be no surprise to anyone that average investors under-perform their relevant benchmarks by a wide margin due to irrational decisions, such as “buying high and selling low”. But if you want to look at the data, Dalbar makes available a free version of its 2012 QAIB Advisor Edition Report which can be found by entering that title into a search engine and then following the link.

Why do I bring this up? Because there is a persistent misunderstanding in this forum about two crucial words “Ease” and “Ability”. Investing is easy. It is no more difficult than buying bell peppers or broccoli the grocery store. However, Dalbar reports (in the table below) what actually happened. Thus, even though investing is easy, and bond-investing is especially easy, the average investor can’t do it well enough to make a real rate of return.

If you want to argue with their data, do so. But the better path would be to admit to the under-performance problem (if it applies to you) and then figure how to make investing as easy as it really is. Stock or bonds, bell peppers or broccoli, the process is the same: Inspect, and then accept or reject and move on.
----------------------------------------------------------------

Avg Barclays Avg
Stock Aggregate Bond
SP500 Investor Bond Index Investor

20 year 7.81% 3.49% 6.50% 0.94%
10 year 2.92% 2.39% 5.78% 0.93%
5 year -0.25% -2.21% 6.50% 0.95%
3 year 14.11% 12.56% 6.77% 4.07%
1 year 2.12% -5.73% 7.84% 1.34%

(2012 QAIB, Adviser Edition, p.10)
Print the post  

Announcements

When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement