Research done by Dalbar consistently shows that the average investor loses handily to the market. Why is this? Because every human instinct we have about investing is wrong.
Market is crashing?! Sell before it’s too late! Market is at an all time high? Terrible time to get in! Fund has been under performing? Drop it for one that has done great recently! Those are all BAD instincts. They’re examples of trying to be clever to outsmart the market when doing NOTHING (except regularly buying and never selling) would yield better results.
I see it all the time. Remember all the HYPE around the ARKK ETF? Around the beginning of the year I heard nothing but ravings about ARKK. The past returns were incredible. Cathie Wood is the golden child of investing with brilliant vision about emerging technologies. Investors POURED their portfolios into the ETF in January expecting those returns to continue. Since then? ARKK has returned -11.2% while a simple total market ETF (like VTI) has returned +15.2%. An under