That 10-percentage point “investor gap” is significantly wider than the three-year gap of 4.51 percentage points and is the third largest annual gap since 1985, the report noted, when Dalbar’s analysis of investor behaviour began.
The average U.S. fixed-income fund investor finished 2021 with a -1.55% return versus a -1.54% return with the Bloomberg Barclays Aggregate Bond Index.
The report also noted the average equity fund investor continued to be a net withdrawer of assets in 2021, for the sixth year in a row. This type of investor has maintained an asset allocation of about 70% equity and 30% fixed income since 2017.
While the average equity fund investor outperformed the S&P 500 in the first two months of 2021, they only did better than the index in two of the remaining 10 months afterwards. This type of investor performed best in value funds, the report noted, with the average small-cap value fund investor being the top performing size and style investor, earning 30.38%.
Average active equity fund investors experienced a larger investment return gap than average equity index fund investors, the report found. The former had an 18.18% return in 2021 compared to a 28.71% return for the S&P 500. The latter had a 23.44% return, a gap of 5.27%. (Active vs. passive comparisons were not provided for fixed-income investors.)
Although the report didn’t draw a causal link between the investment return gap and the average equity fund investor’s behaviour, it did lay out the different types of investor behaviour that lead to flawed decision-making.
Among these investor behaviours are “optimism,” “loss aversion,” and “narrow framing.”
“Optimism” refers to a belief that good things happen to you and bad things happen to others. “Loss aversion” is when an investor expects to find high returns with low risk. “Narrow framing” is when an investor makes decisions without examining all implications.
“The best financial professionals double as behavioural finance coaches of their clients,” Dalbar said in the report. Financial advisors who can help clients overcome these biases can help them make better investing decisions. The report also emphasized the prudence of a long-term, buy and hold approach, and said that advisors could help clients understand the folly of measuring investment success against statistical benchmarks.
The Dalbar report used data from the Investment Company Institute’s, S&P’s and Bloomberg Barclay indexes as well as proprietary sources to compare mutual fund investor returns to a set of benchmarks. The report spans Jan. 1, 1985 to Dec. 31, 2021 and uses mutual fund sales, redemptions and exchanges each month as the barometer of investor behaviour.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
