Today’s Chart of the Day is from a Morningstar article named, “Why Investors Missed Out on 15% of Total Funds Returns.” They call it the “gap,” which is comprised of losses experienced by typical investors from excess trading, buying high-flying funds and conversely, selling low-flying ones. Oddly enough, funds that underperform statistically have a better chance to outperform afterwards. This underperformance works out to a 1.1% loss over 10 years resulting in total returns declining from 7.3% to 6.3%, which is a 15% reduction.
Morningstar's suggestion is to use wildly diversified funds and stay away from volatile investments so you don’t have to trade often. Additionally, if saving for something, do it routinely to not try and time the market.