TRANSCRIPT:
According to a report from Morningstar, they estimate that the average dollar invested in U.S. mutual funds and exchange-traded funds earned 6.3 percent per year over the 10 years that ended on December 31, 2023. That is approximately 1.1 percent per year less than the average fund’s total return over the same period, assuming an initial lump sum purchase. The 1.1 percent gap is explained by the timing of investors’ purchases and sales of fund shares. Hi, I’m Hunter Brockway, founder of Volcker Retirement Strategies, here to guide you to a successful, stress-free retirement while spending more and avoiding being killed in taxes. According to the article we are covering today, the average dollar’s return lagged the average total return in all 10 of the calendar years in the study. Investors appeared to have incurred heavy timing costs in 2020, leading to a negative 2% gap that year.

Now no one is going to match a fund or investment return exactly unless you get in on day one of the study and sell it the last day of the study. Your results will be because you have different times of when you were able to buy in, when you might need to sell to free up cash, you might need to buy high and sell low, others might buy low and sell high, but this study accounts for the average mean returns and the timing of investors moving in and out of the funds across the 10-year span. Morningstar research results point to better returns for investors who can simplify and make mundane of tasks like rebalancing and using buy and hold approach as to attempting to time the markets. Morningstar points out fees matter to a point. Investors have ample reason to choose low-cost funds which are far likelier to earn higher total returns in the future, but we didn’t find a strong link between fees and investor returns in the study.

To be sure that that doesn’t undercut the chase to pinch pennies, but it does suggest that cost can be subordinate to other factors like a fund’s simplicity in the context in which it is used and the maintenance it requires. When it comes to capturing a fund’s full return, you can pick the cheapest of a hard-to-use fund type and still come up well shy of earning its total return by transacting inopportunely. Take action by planning and sticking with your investment style to meet your goals. If you have any financial questions, you can email them to contact at bocaretirement.com or visit us on our website at bocaretirement.com. Thank you and enjoy your successful retirement. Bye