Investing Insights Investors Still Need to Mind the Gap in Their Funds’ Returns
Nov 7, 2025
Jeff Ptak, Managing Director of Research for Morningstar, dives into the eye-opening findings of the Mind the Gap study. He reveals that investors, on average, earned 1.2% less annually than their funds' total returns over the past decade. Ptak discusses key factors contributing to this gap, including trading activity, fees, and market timing. He highlights how certain categories, like allocation and sector funds, have fared better. Lastly, Ptak emphasizes the importance of automation and diversification to enhance investor returns.
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Investor Returns Lag Fund Returns
- The average dollar invested in US mutual funds and ETFs earned 1.2% less per year than fund total returns over the past decade.
- That gap equals roughly 15% of the aggregate total return investors missed capturing.
Context Shapes Investment Success
- The setting where a fund is used shapes investor behavior and outcomes.
- Controlled environments like retirement plans produce smaller investor return gaps than ad-hoc retail use.
Which Categories Capture Returns Best
- Allocation (multi-asset/target-date) funds had the narrowest gaps; sector equity funds had the widest.
- Narrow, streaky strategies are harder for investors to use successfully and show larger gaps.