The average investor put money back into the market in January and was able to outperform the S&P over the first two months of 2019.
But this “recovery” wasn’t enough to mitigate their losses in the second half of 2018 and “fell far short of what a buy-and-hold strategy would’ve yielded,” according to “Holders vs. Sellers,” a new research report Dalbar released today.
The average equity fund investor lost twice as much as the S&P in 2018—nearly 9.5 percent—said Dalbar, a leading investor behavior research firm.
Now, investors are buying again for only the fourth month out of the last 20. The average investor bought into an 8 percent advance of the stock market in January and were able to outperform the S&P 500 by 0.57 percent.
However, a pat on the back may not be in order, according to Dalbar’s chief marketing officer, Cory Clark.
“The average investor may be feeling like they successfully timed the market this time. After all, they sold during the horrible month of December and bought during the recovery of January,” Clark said.
In effect, however, “the average investor lost a significant portion of their portfolio value in the second half of 2018, and January’s gains served only as a numbing agent to hide the sting that lies beneath,” Clark said.
The view that market timing works can only perpetuate emotional investing and lead to devastating effects, he said.
“These last six to eight months have been a silent killer of an investor’s portfolio,” Clark added. “This is a time where the average investor really needs coaching and perspective from a trusted expert.”
A combination of volatile market conditions and bad investor timing caused the average U.S. investor to lose 9.42 percent over the course of 2018, compared with a significantly smaller 4.38 percent retreat by the S&P, the company found.