2012 DALBAR Study Reveals Average Investor Returns


One of my favorite “industry” studies that comes out every year is the DALBAR study. I use the numbers in my books and articles; and it is very useful for advisors who are trying to educate consumers on what the “average investor” has returned over the last 20-, 10-, five-, and one-year time frames.

When people read the DALBAR report, usually they shake their heads because they know they are the typical investor that the study is talking about (and that’s not a good thing).

The official title to the report is “Quantitative Analysis of Investor Behavior.”

The report covers the following:
1. The return of the S&P 500 stock index over the last 20-, 10-, five-, and one-year time frames.

2. What the average investor returned over the same time frames. From 1990 to 2010, the number is an astoundingly low 3.49% profit! Over that same time frame the S&P 500 returned a 7.81% profit.

3. Inflation has been each year for the last 20 years.

4. Annual investor returns by fund type vs. inflation.

5. Average benchmark bond returns over the last 20-, 10-, five-, and one-year time frames.

6. Investor retention data, including how long are mutual funds and bonds held for before selling (this number is shocking).

7. The report compares how investors with different types of investment philosophies would have done over the last 20 years. For instance: “This is the first time in 17 years since the QAIB Report was first published that we have observed the systematic equity investor failing to outperform the average equity investor.”

8. This year’s DALBAR report has a very interesting summary on whether fiduciaries will yield better investment returns and an adviser who is not acting in a fiduciary role. I think you’ll find this part alone worth reading.

Again, this is the most interesting read of any report that comes out every year; and the data is fascinating, interesting and useful. If you have money invested in the stock market or if you are thinking of investing money, this is a report you will want to read.

Roccy DeFrancesco, JD, is author of The Doctor's Wealth Preservation Guide, and founder of The Wealth Preservation Institute. The DWPG has recently been approved for up to 21 AMA PRA Category 1 CME Credits™ in a self-study format. If you would like to purchase the book at a 33% discount as benefit for being a reader of Physician’s Money Digest so you can earn CME credits in the comfort of your home, e-mail info@thewpi.org.

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