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How are the Markets Doing Compared to the Average Investor?


How are the markets doing compared to the average investor? Dalbar provides insightful statistics that we discuss to help your financial journey.

Full Transcript:

Hello, welcome to Arista Advice. Question of the week is: "Paul, how are the markets doing compared to the average investor?" 

Well, we're fortunate to have a company called Dalbar that's based in Boston, that has been running this annual study on a yearly basis, provide some insight. I warn you that the average investor did not do well again, once again for 2020. They got the dunce hat award, but let's look at the numbers.

Dalbar says for 2020 the average broad market equity market did 18.4%. The average investor did 17.09%. They left 1.31% off the table and gave it to Mr. Market. 
On a 5-year rate of return, the broad markets returned 15.22%, and Dalbar, the average investor, did 12.31%, but hold on. "Let's look at the 10-year number, Paul. I'm sure that the average day trader and the person jumping in and out of the market, trying to time the market, I'm sure probably did better on the 10-year average."
Guess what?  They didn't. Same pattern follows on the 10-year. The average broad market did 13.88%, and the day trader who was reading and researching and think that he was smarter than the market only got 10.23%, a difference of 3.5% annual return over a 10-year period. 

What's the lesson and the story and the takeaway? Understand that the markets go up and they go down. You can't time it, so don't try to time it.

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