Individual investors get lower returns than they should. According to a recent study by Jason Hsu of Research Affiliates and coauthors, even though the compound return on the S&P 500 was 8.97{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} per year from 1991-2013, the average stock mutual fund investor earned only 6.87{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6}, a full 210 basis points per year lower. Other studies have found similar results, and the same pattern has been shown for investors in bond mutual funds. The return shortfall earned by the average investor is due to predictable mistakes that can be avoided.
