It’s a surprising statistic, but in the average year, more than 80% of the United States’ actively managed mutual funds underperform the broad market.
The funny thing is, while the equivalent data on individual “retail” investors is a bit fuzzier, most of them don’t keep pace with market benchmarks like the S&P 500 either.
The streaming TV device maker’s 2017 IPO preceded what eventually turned into more than a 100% gain at 2019’s peak price near $176 per share.
All of them should have stuck with the game-changing consumer technology company, though.
Not only is it difficult to do, many people end up doing themselves more harm than good with their timing efforts.
The world just needed a little time to work around the pandemic and stimulus money to take the edge off the shock.
These economic ebbs and flow are to be expected every few years, and investors show similar levels of fear and greed at each high and low.
As we now know, however, that sentiment actually signaled a cyclical bottom for stocks, reflecting feelings about the recent past rather than reflecting the plausible future.
Most of us were simply ignoring the economic red flags waving at the time, like hedge fund failures, untamed inflation, and surprisingly strong market sell-offs that indicate indiscriminate dumping of stocks.
Aside from the fact that consumer confidence is still lingering well below record highs, investors aren’t ignoring any potential economic pitfall — they’re all being priced in.
Finally, while many investors make tentative plans to diversify their portfolios across several asset categories and classes, not enough investors fully execute those plans.
Mutual fund managers at Hartford crunched the numbers early last year, comparing a regularly rebalanced 70% stocks/30% bonds portfolio to the same starting portfolio that was never rebalanced.
Also bear in mind that Hartford was only using the S&P 500 Index and the Bloomberg Barclays US Aggregate Bond Index as a very simple test portfolio, ignoring the effect of sector and market-cap diversification.
Here’s how to spring clean your finances after a year of pandemic living.