The Impact of Emotional Investing

The chart below illustrates how clients' emotional investment decisions can negatively impact their results. In fact, if the performance of an average investor was an asset class, it would be the worst-performing category—just slightly behind the average inflation rate. 

20-Year Annualized Return by Asset Class 2000–2019

Source: J.P. Morgan Asset Management; Dalbar Inc. Indexes used are as follows: REITS: NAREIT Equity REIT Index; EAFE: MSCI EAFE; Oil: WTI Index; Bonds: Bloomberg Barclays U.S. Aggregate Bond Index; Homes: median sale price of existing single-family homes; Gold: USD/ troy oz; Inflation: CPI; 60/40: A balanced portfolio with 60% invested in S&P 500 index and 40% invested in high-quality U.S. fixed income, represented by the Bloomberg Barclays U.S. Aggregate Bond Index. The portfolio is rebalanced annually. Average asset-allocation investor return is based on an analysis by Dalbar Inc., which utilizes the net of aggregate mutual fund sales, redemptions, and exchanges each month as a measure of investor behavior. Returns are annualized (and total return where applicable) and represent the 20-year period ending 12/31/19 to match Dalbar’s most recent analysis. Guide to the Markets – U.S. Data are as of May 31, 2020.

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