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Fund Spy

Mind the Gap 2015

Why investors get less than their funds' total return.

It's time for our annual look at how well investors are making use of mutual funds. I do this by looking at the average investor's returns versus the average fund's returns.

We look at monthly fund flows and monthly returns, then we weight those by asset size to come up with an estimate of returns for the average investor. We then compare those figures with the average fund return on a category and asset-class basis. The gap between those returns tells us how well investors timed their investments. The average investor return is really the bottom line, though. Ideally, you want no gap in returns and a high average investor return.