A picture is worth a 1,000 words, so I will let the chart below do most of the talking today.  The data comes from a study conducted by DALBAR, Inc., a leading financial services market research firm, that examines how investment behavior affects investor returns.

As you can see, the average stock and bond fund investor is earning a significantly smaller return than the broad market.  The difference in returns is largely due to costs and behavioral tendencies.  There are several basic ways to avoid the large shortfall depicted above and enhance your returns:

  * Resist the urge to trade stocks regularly.

  * Buy low-cost funds that track the overall market.

  * Consistently contribute to your portfolio, regardless if the market is up or down.

  * Diversify for your age and investment goals – once you set an allocation, stick to it!

  * Rebalance at regular intervals (quarterly, semi-annually, or annually).

Acropolis Links:

Investing 101: Understanding Standard Deviation (David Ott)

Fixed Income Weekly – Holding on For a Bumpy Ride (Cliff Reynolds)

Peter Lazaroff, Investment Analyst

St. Louis, MO

www.acrinv.com