The Investor Behavior Gap: What DALBAR's Research Shows
Since 1994, DALBAR's annual QAIB report has compared the return of the S&P 500 to the return the average mutual fund investor actually earned. The average investor has consistently earned less than the funds they invested in — largely because of poorly timed buying and selling.
Updated August 2026 · Educational only — not financial advice
Citation
DALBAR, Inc., Quantitative Analysis of Investor Behavior (QAIB), published annually. dalbar.com
Study Overview
QAIB measures the difference between the total return reported by mutual funds and stock indexes and the return that the average investor in those funds actually captured. The gap exists because dollar-weighted returns (which account for when money moves in and out) are typically lower than time-weighted returns (which assume a lump sum invested for the entire period) when investors tend to buy after gains and sell after losses.
Methodology Summary
DALBAR uses industry cash flow data (fund sales, redemptions, and exchanges) to calculate the average investor's actual dollar-weighted return, then compares it to the time-weighted return of a relevant benchmark such as the S&P 500 over the same period. The report is published annually and includes multi-decade trailing averages alongside single-year results.
Key Findings
- In 2024, the average equity fund investor earned 16.54%, versus 25.05% for the S&P 500 — a gap of about 8.5 percentage points, one of the largest annual gaps of the past decade.
- In 2025, the gap narrowed to about 0.72 percentage points (S&P 500 17.88% vs. average equity investor 17.16%), among the smallest gaps recorded since the mid-1980s.
- Over longer horizons the gap tends to persist: over a 20-year period, DALBAR has found the average equity investor earned roughly 1 percentage point less annualized than the S&P 500 itself.
- The size of the annual gap varies significantly from year to year and narrows or widens depending on how much investors traded in and out of funds during volatile periods.
Limitations
- The gap is measured at the aggregate fund-flow level, not for any specific individual — your own results depend entirely on your own behavior.
- DALBAR's methodology has been debated; some researchers argue the gap partly reflects normal cash flow patterns (like retirees withdrawing money) rather than pure behavioral mistakes, and one 2024 academic paper challenged whether "bad timing" costs investors as much as headline QAIB figures suggest.
- Year-to-year gaps swing a lot — a single volatile year (like 2024) can dominate the headline number.
Practical Meaning
Whatever the exact size of the gap in any given year, the consistent theme across investor-behavior research is that emotionally driven buying and selling tends to cost money. This is a big part of the case for buy-and-hold investing and automatic, rules-based approaches like dollar-cost averaging: a simple plan you can actually stick to may outperform a more "sophisticated" one you abandon at the wrong moment.