Investors Still Leaving Money on the Table Due to Poor Timing

A new study from Morningstar reveals that investors in US funds and ETFs are still leaving money on the table. The Mind the Gap report analyzed data for a 10-year period ending December 31, 2025, and found that the average dollar invested earned 8.7% annually, which is 1.2 percentage points less than the funds' aggregate annual total return of 9.9%. This gap is not due to the funds' performance but rather the timing and size of investors' purchases and sales.

However, investors in US stock funds and ETFs had a better outcome, capturing virtually all of their funds' returns with an average gain of 12.8% per year, just shy of the funds' 13.3% aggregate annual return. This is the bad news/good news story from the 2026 edition of the Mind the Gap study.

The report also found that investors in allocation funds, such as target-date funds, captured a larger share of their funds' total returns than those in other types of funds, except for US equity funds. This is because allocation funds are often used in a systematic fashion and handle routine tasks like rebalancing. The study suggests that holding fewer, more widely diversified funds can be beneficial.

One area where investors struggled was with cryptocurrency ETFs, which lost around 5.8% per year on average during the 2-year period ending June 30, 2026. This is despite an aggregate total return of 8.5% per year for these ETFs. The poor result appears to stem from ill-timed purchases and sales.