Just How Bad Is Fund Investors' Timing?
Morningstar data shows a persistent performance gap for fund investors, but DALBAR says the problem is much worse.
Mutual fund investors chase success. They sell funds that have been losing and buy those that have been winners. Those facts can be verified.
For one, we can track fund flows into and out of Morningstar Categories. When we do, we see that the better-performing asset classes generally attract new investments, while the weaker performers are redeemed. For example, U.S.-stock funds attracted new shareholders through the bull market of the mid-2000s, then suffered outflows following the 2008 crash.