In the case of your enemies, you can’t get any closer than yourself. This seems harsh, but in the latest DALBAR study, that just seems to be the truth. DALBAR is a research firm that publishes a Quantitative Analysis of Investor Behavior each year. Based on the study, in 2018, investors lost 9.42% compared to 4.38% lost by the S&P. That is a big difference (twice as much!).
Investors took out more than they deposited and underperformed the market in good times and bad. The problem was magnified when investors were out of the market during the recovery months. They just never got it “right” for timing when to get in and out of the market.
DALBAR has been doing this investor behavior study since 1994 and this result is consistent over time—investors consistently UNDERPERFORM the market indexes. This is due to the fact that investors fail to remain strategic and disciplined over long time periods. Volatile markets and rough months are NOT unusual and will come again, stick to your plan and don’t become “one” of the investors that consistently underperform the market and become their own worst enemy.
Investing is an endeavor that moves money and wealth from investors who do not have a process or discipline to those that do. Learn from the old lesson in this study—bad investment behavior is very expensive.