Lephturn, thanks for the link. Very interesting. I have an issue with this quote, though:
DALBAR study has nothing to do with the long-running debate between DIY stock pickers and DIY indexers.
The study is often cited in a different discussion altogether. The discussion about Doing-It-Yourself (of any kind) vs. Hiring a professional adviser.
Advisers love to cite DALBAR to highlight the value they add to the client portfolios.
Look at the DALBAR gap, they point out. Those foolish DIY investors engage in a self-destructing behaviour. They chase last year's winners. They buy high. They sell low. They need *us* to protect them from themselves.
Nothing to do with DIY indexing vs. DIY stock picking, don't you agree?
Canadian Capitalist -- Helping you invest & prosper
It should be obvious that when times are good and stocks are high more people have money to invest. When the economy goes to hell, unemployment is high, business is in the dumpster and the stock market crashing is when people have no money to invest and must sell their investments to live.
So why should it be surprising that most new money comes in at the peak and goes out at the bottom?
Now if you are a serious investor who is involved with the markets for the long term this is one of the things you have to take into account. There is also the psychological effect that makes it easy to follow the herd and buy high - sell low, and very hard to buy at the bottom even though you know it is the thing to do and can prove mathematically that it is the time to buy.