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Investments work, Investors don’t – the 2014 DALBAR Results

by Doug Lennick

Think2Perform Clients and Friends:

I’m excited to share a complementary copy of the DALBAR 2014 Quantitative Analysis of Investor Behavior Study with you. Those of you who have received this before will recognize it  and for those receiving it for the first time, this is an annual study that shows the investment returns of consumers vs. the standard indexes.

Highlights of this year’s study include:

  • Despite guessing right 75% of the months in 2013, investors still failed to beat the market; the 20 year average return earned by investors for an equity fund was 5.02% compared to 9.22% for the S&P 500.  Investors underperformed the market by 4.20%.
  • Investment results are more dependent on investor behavior than on fund performance; the primary reason given for this shortfall is market timing failure explained as “Investors tend to sell after experiencing a paper loss and start investing only after the markets have recovered their value.  The devastating result of this behavior is participating in the downside while being out of the market during the rise.”
  • This is a consistent trend; under any other measured period (i.e., since QAIB inception, 10 year, 5 year, 3 year and 1 year) and investment type (i.e., Asset Allocation and Fixed Income Funds), investors under-performed their index.
  • Attempts to change this trend through consumer education has proved to be futile.  It takes education and action to change behavior.  Knowing alone is not enough.  It requires knowing and doing.

At think2perform, we put a strong focus in our training and coaching on “doing”.  Our goal is to give you concepts and tools that can be applied on a daily basis to help you make more thoughtful rather than emotional decisions.  That’s true for your job, with your family and, of course, for investment decisions you make or influence in others.

I hope you value this study as much as I do.  If you are interested in obtaining a copy of this study or are interested in learning more about working with think2perform, please contact us at 612.843.5000 or dlennick@think2perform.com.

– Doug Lennick

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