Back in my high school years in the mid-1970s, investing your own money was difficult and expensive. The fund company Vanguard was founded in 1975, which was also the year the SEC abolished fixed commission rates on the New York Stock Exchange, ending 183 years of price-fixing. Competition among brokers, and the rise of discount brokers like Charles Schwab, pushed commissions from over 80 cents per share to roughly four cents by 2000.
 
Today there are thousands of mutual funds and ETFs to choose from to build your own portfolio, and management fees are lower than they were even a decade ago. Although it has become easier than ever to manage your own money, the question is: should you? The answer is: probably not.
 
Marketing research firm DALBAR conducts an annual Quantitative Analysis of Investor Behavior (QAIB) estimating how the Average Equity (and Bond) Investor performed. The latest report revealed that the Average Equity Investor earned just 16.54% in 2024, compared to the S&P 500’s 25.02% return; that’s an 848 basis-point gap.
 
But that is just one year; what about the longer term? Over the past decade, DALBAR estimates the average equity fund investor earned roughly 9.8% annually, compared with an annualized return of about 13% for the S&P 500. The average asset-allocation fund investor earned closer to 4%, versus approximately 8% for a balanced 60/40 portfolio. If we look at an even longer period like 30 years, DALBAR estimated that there is a 3.5% gap.
 
What is causing this performance gap? Chalk it up to investor behavior. Despite strong performance in the equity markets, investors continue to underperform by selling after a downturn and buying after a rally.
 
As Forbes points out: “While market history reveals generally strong long-term returns, the path to those returns has been anything but smooth. Since 1928, the S&P 500 has delivered an annualized total return of roughly 10–12% when dividends are reinvested. Over that same history, the average intra-year decline has been about 16%, even in years that finished positive.”
 
That means that for skittish investors, there is generally always a time to pull out of the market. But what if we were incredibly perceptive and always invested after a market correction?
 
Fund manager DFA Puts it: “Frequent reports of all-time market highs may keep you from buying, thinking surely what goes up must come down, so I better wait. But research shows that buying shares at all-time records has, on average, produced similar returns to stocks bought following a sharp decline. That means trying to time when to get into and out of markets is unlikely to lead to better results.”