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The gap between the fund and the investor

Investing Basics

Same fund, worse result

Studies of investor behaviour keep finding the same thing: the average investor earns less than the average fund they own. The fund did fine. The investor bought after it rose and sold after it fell. Behaviour, not selection, is where most of the return leaks out.

Check yourself

Investors usually underperform the funds they own because they…

  1. Pick bad funds
  2. Buy high and sell low on emotion correct
  3. Pay too little in fees

The gap is behavioural. Which is good news — behaviour is the one variable you fully control.

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