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Mind the Gap 2016

What factors lead to better investment timing?

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A version of this article was published in the May 2016 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor here.

Investor returns are dollar-weighted returns, as opposed to time-weighted returns, which are the standard way of displaying an investment's total returns. We calculate investor returns for a single fund by adjusting returns to reflect monthly flows and their compounding effect over time. Generally, investor returns fall short of a fund's stated time-weighted returns because, in the aggregate, people tend to buy after a fund has gained value and sell after it has lost value. Thus, they miss out on a key part of the return stream.

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Russel Kinnel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.