In 2015, Mark Matson gave the introductory speech at the 2015 Investor Symposium where he talked about saving the investor. He played off the tagline of the NBC show Heroes, which was “Save the Cheerleader; Save the World.” He instead said we should “Save the Investor to Save the World.”
Matson wasn’t suggesting that the start of any utopian is to make sure that investors are happy, which he notes, but he does provide significant evidence of how conditions for investors have diminished in the past quarter century. While we certainly recommend that you check out the entire speech, here are a few key points to consider:
The Investor Has Not Received an Adequate Return on Investment
A simple index of the S&P 500 would have seen an annualized return of more than 11% over the course of the last 30 years. Based on DALBAR’s annual Quantitative Analysis of Investor Behavior study, the average investor investing in an equity fund would have only received a return of less than 4%. Investors who hoped to get a market-based return instead found that their returns underperformed the market. These meager returns are due primarily to investor behavior and the fact that investors might not be sticking with their funds long enough. The DALBAR study referenced by Mark Matson found the average amount of time an investor will hold on to his or her portfolio is three years. Those who invested in fixed income saw even more dismal results. While the aggregate for fixed income was 7%, the average return over 30 years was not even 1%.
Inflation Supersedes Market Volatility
In 2015 when Mark Matson gave the speech, inflation was hovering around 3%. While he concedes that this is rather low when you look the numbers historically, you also have to consider the fact that investors were often not receiving significant returns on their investments. When you get returns in equity mutual funds of less than 4% and less than 1% on your mutual funds invested in fixed income, inflation can really eat up any returns you might have made.
Investors Are Feeling Mental Anguish
Check the news right now, and you’re likely to find scary headlines about the economy, terrorism, climate change, and more. Investors should know that the media is in the business of making money, and there is no better way to make money than to create headlines that cause fear and keep you tuned in. In his 2015 address, Mark Matson was quick to tell those in attendance that investors should keep one thing in mind to sleep at night: nobody can predict the future one way or the other.