Markets can feel a lot like casinos when you’re in the moment: bright lights, fast swings, and a flood of emotion that tempts you to act. The difference is that investing, when used well, could be considered one of the greatest wealth engines humans have. This episode of The Financial Huddle centers on a simple truth: time in the market beats timing the market. 

We unpack why the average equity investor trails a plain S&P 500 index year after year, and how behavior explains most of the gap. 

If you’ve ever felt the urge to pull out during volatility or chase a hot stock, you’re not alone. The data shows that those impulses often cost a fortune, and the remedy is boring on purpose—clear strategy, patience, and an eye on total costs.

What the Data Says About Investor Returns

The Dalbar report has tracked investor behavior for decades and continues to reveal the same pattern: Average equity fund investors underperform broad indexes by wide margins. In 2024, Dalbar cited a striking spread between average investors and the S&P 500, reinforcing that performance-chasing and fear-driven selling are powerful drags.¹ 

We illustrate the stakes with a thought experiment: over a decade, simply missing the market’s single best day meaningfully reduces terminal wealth; missing the top five or fifteen days can cut the result by half or worse. Those best days often cluster around the worst days, which means stepping out after a sell-off risks missing the rebound. 

The lesson is twofold: build an emergency fund so you’re not forced to sell at the wrong time, and adopt rules that keep your plan steady when emotions spike.

Investing Strategies

Once behavior is tamed, the question becomes how to invest. 

This episode compares common approaches: active management seeks to outsmart the market through timing and security selection, but even professionals struggle to do this consistently after costs. Indexing buys the market through broad, low-cost funds that track benchmarks like the S&P 500 or Russell indices, capturing market returns with minimal fuss. Passive buy-and-hold is the discipline that makes either approach work, allowing compounding to do the heavy lifting. There’s also evidence-based investing, which tilts toward factors like small size or value, aiming to harvest long-run premiums while staying diversified. 

Any of these can fit, but they depend on your time horizon, risk tolerance, and willingness to sit tight during drawdowns.

Investing Tools to Explore

Tools matter too. Many investors build portfolios with mutual funds and ETFs. Mutual funds price once daily and transact with the fund company; ETFs trade on exchanges throughout the day, often with lower expense ratios and tax efficiency. 

Neither structure guarantees success; what matters is alignment to your plan, cost, and behavior. 

Keep An Eye On Fees

We also stress a critical but overlooked topic: fees. Advisory fees, fund expense ratios, 12b-1 marketing fees, trading costs, and custodial or plan fees can stack up. A seemingly modest 1% advisory fee plus a 0.50% average fund fee and other administrative costs can push the all-in number toward 2%, which compounds against you over time. Demand clarity on the all-in fee so you know exactly what you’re paying for advice, management, and platform.

Putting It All Together

To pull it together, use a simple three-part filter before you buy anything: strategy, fees, and time horizon. 

Strategy defines what you hold and why, including diversification across U.S., international, and possibly small caps or value tilts. Fees define how much of your return you keep; prefer low-cost building blocks unless you have a clear, evidence-backed reason to pay more. Time horizon defines your capacity for volatility; the longer the runway, the more equities can make sense, provided you keep an adequate emergency fund to avoid forced selling. 

Keep rebalancing rules simple, automate contributions, and measure progress by years, not days. 

Boring wins because boring compounds, and compounding is the quiet force that turns steady habits into real wealth over time. 

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Sources:

1.) How the Average Investor's Returns Compare to the Market (Forbes)

Disclaimer:

The information presented here is for educational purposes only and is not a solicitation for the purchase of any financial product. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting financial professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.