Every year, two firms (Dalbar and Morningstar) analyze how investors perform compared to how the actual investments (markets) perform. Is there need for comparison? If the S&P 500 went up 10%, my account should ALSO be up 10% right? Well—turns out—not really.

Since 1994, Dalbar (an independent expert in analyzing financial markets) has released an annual report measuring the effects of buy/sell decisions by investors. Morningstar has published a similar study called “Mind the Gap” to measure stock market returns compared to investor returns. While there are differences in calculations, the conclusion for both is the same.

Year after year, the results show investors usually earn less than the investments they are buying. As Carl Richard’s charts states, there is a GAP between what investors earn and what the market earns. This stinks and frustrates me beyond belief!


Investors make poor investment decisions due to behavioral biases and engage in return-destroying behavior (i.e. earning less than the market).  We have talked about behavioral biases before, and most people (us included) don’t like to admit that they let emotions take control in times of uncertainty.

The studies consistently tell investors they are their own worst enemy.  Look above at the common biases and think about some of the ways that we justify our decisions; all of these can lead to mistaken reactions that throw us off course.

When markets rise, investors are typically confident. They might increase the amount they’re investing every month or switch to a more aggressive allocation. But when markets drop, many people get jumpy. They often sell when they shouldn’t, instead of sticking with a discipline, and avoiding the media noise and inner fear. Many investors trade at the worst times, buying high and selling low.

How much are investors losing by falling prey to their own emotions? Dalbar’s study states that over the past 10 years, the Average Equity Fund Investor has earned 9.43% annually while the S&P 500 has earned 13.56% annually1. This is a gap of 4.13% that investors are leaving on the table!


Don’t read this fact and just accept it (I’m not!). Essentially both studies come to the conclusion that to make the most of your money, and maximize your returns, you need a thoughtful plan and willingness to stick with it despite the daily drama/fear/volatility (you pick your word). This is especially true during bumpy/volatile times.

At BCM, we have a solid investment plan built with diverse assets to work in your favor and help minimize the risk. We choose a mix of stocks and bonds that makes sense and allows you to sleep at night. By having BCM Advisors keep the plan on track, we afford you the luxury of closing that “gap”.

“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” Benjamin Graham

If you would like to know more about how we keep our clients on track, shoot us an email or call.

1Dalbar, 2020 QAIB Report for the period ending December 31, 2019. www.dalbar.com

2Morningstar, 2020 “Mind the Gap” for the period ending December 31, 2019. https://www.morningstar.com/