DALBAR is a third party analyzer of the financial services industry. They have been analyzing investor behavior for almost 2 decades.
This years report indicates that the average equity investor outperformed the S&P 500 in 2009, and the average bond investor did better than the Barclays Aggregate Bond Index in 2009.
That is the good news. The bad news is that over the 20 year period ending 12/31/2009 the average equity investor's return of 3.17% was well below the S&P 500 20 yr return of 8.20%. As well, the average bond investor returned 1.02% over 20 yrs compared to the index return of 7.01%
The numbers are dramatic and many, including DALBAR, conclude that investors do not buy and hold. They become irrational and buy and sell at the wrong times.
The same conclusion was reached in a study, highlighted in a recent NY Times story, by Philip Maymim , a professor of finance and risk engineering at Polytechnic Institute of New York University. Professor Maymim found that the value of an investment advisor is not in the stocks or mutual funds they recommend but in their ability to prevent an investor from impulsively trading at the wrong time.
I would also add that a good advisor starts by placing the investor in the appropriate portfolio for their risk tolerance and time horizon, then hold their hand and keep them on course.
The NY times story: http://www.nytimes.com/2011/03/12/your-money/stocks-and-bonds/12wealth.html?_r=1&ref=business
It most cases it will pay for investors to find an advisor they can trust. I recommend an independent fee-only advisor who has no conflicts of interest from commissions and who has a good understanding of market history and investor behavior.
