Freedom Isn’t Free UK Personal Finance
Investing
The Behavior Gap: Why Investors Earn Less Than Funds
The average fund investor earns roughly 2% a year less than the fund itself returns. The fund is fine. You are the problem. Closing the gap is worth more than any stock pick.
The behaviour gap: fund return vs investor return
Fund return (typical)7.0% a year
Average investor return5.0% a year
The behaviour gap2.0% a year lost
Repeated DALBAR studies show investors lag the funds they own by buying high and selling low.
Key takeaways
1
Investors often earn less than expected due to emotional selling and buying at wrong times.
2
Fear leads to panic selling, locking in losses, while chasing high-performing funds can lock in high prices.
3
Richards uses simple sketches to illustrate complex financial ideas, making them memorable.
4
The book suggests automation to remove emotional decision-making from investment processes.