Investors Still Need to Mind the Gap in Their Funds’ Returns
Investing Insights
How Investor Return Differs from Total Return
Margaret asks how investor returns are measured; Jeff explains investor return vs total return and the 10-year timeframe.
Are you getting the most out of your fund’s performance? Over the past 10 years, the average dollar invested in US mutual funds and exchange-traded funds earned 1.2% less per year than what those funds returned during the same period. That’s the top-line finding in this year’s Mind the Gap study, which aims to address the question of where investors succeeded in capturing most of their funds’ returns, and where they fell short. Jeff Ptak, a managing director for Morningstar Research Services, breaks down the takeaways from the report and what investors can do if they want to avoid leaving money on the table.
On this episode:
How does the report measure the difference between investor returns and total returns?
How does the latest research compare with previous years? Is the “gap” going away?
This difference in investor returns and total returns doesn’t just come from people failing to time the market. What else might cause the gap?
Where have investors been able to capture most of their funds’ total returns, and where have they fallen short? Are there certain categories that stand out?
Exchange-traded funds continue to gain popularity and market share. Did the investment type, mutual fund or ETF, make a difference in investor outcomes?
Morningstar research has found that active funds have largely struggled to beat their benchmarks, but certain categories are better suited for active management than others. Is there a difference in the investor return gap in active versus passive funds?
The study found that the more investors traded, the less they made. Why is that?
Morningstar has found that fees tend to be a predictor of performance. Does that finding hold when looking at investor returns?
The report also looked at the effects of return volatility. How did that translate to investor outcomes?
You’ve written that where a fund is utilized can be just as important as the type of fund and how it’s used. Can you explain that?
What is one takeaway from your research?
Watch more from Morningstar:
The US Dollar Is Weak. Is Your Portfolio at Risk?
2025’s Winners and Losers, from Gold to Small Cap Stocks to the 60/40 Portfolio
The Stock Market Is Ultra-Concentrated. Here’s How to Manage the Risks.
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