Some investors have bad habits. Instead of chasing hot assets and betting on speculative plays, exchange traded fund investors should begin implementing a strategy to help provide a disciplined approach to long-term investing.
According to a recent DALBAR Inc. study, “Quantitative Analysis of Investor Behavior,” investors have lagged the funds they bought since 1984, writes Chuck Jaffe for MarketWatch.
The research firm calculates that the average equity fund investor only saw a 5.02% return over the past 20 years, whereas the S&P 500 returned 9.22%.
Investors would monitor a potentially up-and-coming asset and buy a fund after a period of strong returns. When the category begins to cool, investors then begin to look for the exit and then shift the money into another hot asset. In essence, most are buying high and selling low. [Value ETFs Take the Lead]
Investors have opted to sit out on the sidelines after a huge sell-off, missing out on the potential upside off the bottom, DALBAR found.