Dalbar Study Shows Mutual Fund First: Equity Investors Beat S&P in 2004
Friday, 01 April 2005
The average equity mutual fund investor beat the key market average by improved investor behavior and market conditions that could be described as a “perfect storm”. The average investor earned 12.6% in 2004, while the S&P 500 total return was 10.9%.
Average investors earned more in 2004 than the hypothetical buy & hold S&P 500 investor because inflows continued through the ups and downs of the 2004 market. Unlike earlier patterns of behavior, when investors withdrew funds as the S&P declined, 2004 showed continued new investments throughout the year. The investments that were put in play during the downtrending months catapulted into huge gains in the post-election boom.
The late 2004 surge pushed 20-year investor returns ahead of inflation and buoyed the shorter three and five year returns past the S&P 500.
These findings were derived from Dalbar's annual Quantitative Analysis of Investor Behavior (QAIB) study of 2005. While investors still displayed the imprudent behavior of selling after a decline, as the 2004 data in the following table shows, the trend was diminished from earlier periods. (Note lowered inflows following April and July downturns.)
($B Net Flow, % S&P 500 Return) Jan - +43, +1.8 Feb - +27, +1.4 Mar - +19, -1.5 Apr - +23, -1.6 May - +1, +1.4 Jun - +14, +1.9 Jul - +10, -3.3 Aug - +2, +0.4 Sep - +13, +1.1 Oct - +8, +1.5 Nov - +22, +4.1 Dec - +29, +3.4
QAIB 2005 introduces new investor behavior data including asset allocation funds, retirement savings requirements, a “Guess Right Ratio”, impact of investment selection, and a new table for communicating risk.
QAIB 2005 is available by contacting Dalbar at 617-723-6400 or at
Dalbar, Inc., the nation’s leading financial-services market research firm, is committed to raising the standards of excellence in the financial-services industry. With offices in both the US and Canada, Dalbar develops standards for, and provides research, ratings, and rankings of intangible factors to the mutual fund, broker/dealer, discount brokerage, life insurance, and banking industries. They include investor behavior, customer satisfaction, service quality, communications, Internet services, and ratings of financial-professionals.
