A 2011 study from DALBAR, a Boston-based research firm, shows that investors achieved a mere 41.9% of the S&P 500’s performance over the 20 years ended December 31, 2010.
In other words, investors left 58.1% on the table.
The DALBAR study also shows that the average investor achieved only 3.8% a year versus the 9.1% annualized returns of the S&P 500 because they tended to jump in and out of the markets at the worst possible moments.
Adding insult to financial injury, Berkeley Finance Professor Terrance Odean’s analysis of more than 10,000 retail brokerage accounts shows that the stocks investors sell tend to outperform the ones they buy.
In fact, Odean found that winning stocks went on to gain an average of 3.4 percentage points more in the year after they were sold than the losers to which investors clung.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.