Looking at the Performance of An Average Investor Versus the S&P 500
October 18, 2022
Welcome to Wealth Enhancement & Preservation’s Market Minute, where we get to update you on everything that happened in the financial markets this week. My name is Darrin Cohen, and I am the CEO of Wealth E&P.
There are three things I'd like to cover this week. First, of course, I want to show you the market performance for last week in the below chart, which was drastically different across the three indices. This was unusual: the DOW was up about 1.15%, the S&P was down about 1.5%, and NASDAQ was down about 3%, which was a big difference.
The second thing I want to talk to you about is investor behavior and how that impacts average returns. This is a study Dalbar does every year looking back 30 years to look at what investor performance is versus the index or market performance.
As you can see above, while the market average is about 10% over the long term, the average investor only earns about 4%. When asked, investors typically think this is because of the fees or some hidden agenda. However, it's been proven that the difference is entirely because of investor behavior or emotions that get in the way with investment decisions.
To piggyback that, I thought it would be interesting to show you that Vanguard did a study; they are, of course, the low-cost provider. Vanguard talks about really not needing an advisor. However, their study below shows that because of all these industry enhancements that advisors can bring to the table, on average, an advisor will enhance portfolio returns by about 3% a year.
If you have any questions about this topic, your portfolio, the economy, or if you want a risk profile or a retirement projection, please feel free to reach out, visit www.wealthep.com, or give us a call at (678)-739-0175. Otherwise, stay tuned for our Market Minute next week!
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