“Buy and hold” and “don’t time the market” might be the two best-known pieces of investing advice, but this common wisdom keeps falling on deaf ears. Want proof? In 2020, spooked investors withdrew half a trillion dollars when the pandemic sent markets tumbling, but when stocks rebounded, many missed out on the gains.
That’s according to Morningstar’s new Mind the Gap report, an annual analysis of the so-called investor return gap, or the difference between the returns investors actually experienced and reported total returns for various funds. Morningstar’s team estimates that the average investor earned 6.3% per year from 2013 to 2023, a full percentage point less than the average U.S. mutual fund’s or ETF’s total return of 7.3%. That gap can largely be accounted for by investors mistiming the market.
