Mutual fund investors continue to suffer the consequences of their actions by sometimes zigging when they should be zagging to try and navigate market conditions.

The latest research from Morningstar measuring investor performance against the performance of mutual funds in which they invest, shows that investors still face challenges in using mutual funds correctly.

“Investors tend to buy high and sell low, missing out on a fund’s gains in value,” said Russel Kinnel, chair of Morningstar’s North America ratings committee.

Mr. Kinnel evaluated U.S. open end funds and calculated average asset-weighted investor returns and average total fund returns over 10 years through December, and found that investors cost themselves between 74 basis points and 1.32% per year by mistiming the market. The average annualized investor-returns gap for the 10-year periods ended 2012 through 2015 was negative 1.13%.

“Our investor returns data has shown that investing decisions made a decade ago have an impact that compounds powerfully over time,” Mr. Kinnel said. “The latest data shows that investors still face challenges in using mutual funds correctly.”

The annual study, which Morningstar calls “minding the gap,” underscores the risks of trying to time the market, according to Mr. Kinnel. “We know that, collectively, market-timing is not good,” he said.

Source:  Jeff Benjamin