Tom Cock at FundAdvice.com reports that investors most often are beaten by the market.

In the 20 years from 1976 to 2005, the Standard & Poor’s 500 Index compounded at a rate of 11.9 percent annually while investors in US stock funds achieved a return of only 3.9%. Investors in bonds also did not do that well.

The reasons for this are as follows:

• Most investors had poor timing when deciding to get in or out of markets.
• Investors based their decisions on bad advice from professionals whose real job was selling. For example, a study found that stock and bond funds sold by brokers consistently performed worse than no-load funds.
• Most investors base their decisions on emotions rather than hard headed rational thinking.

Dalbar Research of Boston who studied this problem, found that the best way to get higher returns is to make a plan and stick to it both when times are good and when times are bad.

Source: FundAdvice.com