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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)
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