The Average Investor

Even with our discussion of the Efficient Markets Hypothesis (EMH), we often get the feeling that many students still believe that when they leave our class they will become superstar investors and greatly outperform the market. So, how have investors done on average? In the chart of the week at BlackRock, it appears that the answer is poorly. Over the past 20 years, oil has averaged 8.6 percent, stocks have averaged 7.8 percent, and bonds 6.6 percent. Inflation has been a relatively mild 2.6 percent. Yet, over this period, the average investor has returned only 2.1 percent per year! The reason given by BlackRock is that the average investor allows emotion to rule their decisions, moving into and out of different investment classes at the most inopportune times.