Two Sides of a Trade
In an article entitled "The Fallacy behind Investor versus Fund Returns (and why DALBAR is dead wrong)," investment researcher Michael Edesess questions the notion that mutual fund shareholders and pension funds are similarly poor market-timers. Responds Edesess, "Surely, if one party to a transaction is a bad timer, the counterparty must be a good timer--either consciously or unconsciously."
The sentiment is correct. Investors traded shares Lehman Brothers stock right up until the company's demise on Sept. 15, 2008. For every losing buyer of Lehman shares, there was a winning seller. Securities that are sold don't disappear into the firmament; those that are purchased don't materialize from ether. The market's transactions are symmetrical.