An Inconvenient Truth from John Bogle via Fool.com cautions investors. In my opinion the exuberance of playing even mutual funds, much less stocks, in the grand scheme of average investors is telling.
I recently came across a chart that John Bogle, founder of the Vanguard Group, posted on his blog. This blog highlighted some startling information.
The return data is a few years out of date, but the point remains clear. While the S&P 500 earned an annualized 12.2% return from 1984 to 2002, the average equity mutual fund only earned 9.3%.
But what really stands out is that the average mutual fund investor only earned 2.7% a year during that time.
This means that the profit from a $1,000 investment made in the S&P 500 in 1984 would have been $7,910 at the end of 2002, whereas for the average equity fund, it would have been only $4,420.
And the profit for the average mutual fund investor during that time? A measly $660.
There is a study on 401k behavior as well. Amazing. This included the roaring 90’s!