Morningstar aims to address the question of where investors succeeded in capturing most of their funds’ returns. They estimate fund investors earned a 6.3% annual investor return over the 10 years ended Dec. 31, 2023, while their fund holdings earned a 7.3% annual total return, resulting in a 1.1% “gap.”
Mind the Gap 2024
Morningstar
Jeffrey Ptak
Research
20 Pages
Key Takeaways
Gaps persist across fund types: Investors earned 6.3% annually vs. 7.3% fund returns, largely due to poorly timed inflows and outflows
Volatility compounds mistakes: Highly volatile funds, especially sector equity, showed wider gaps, with investors often buying high and selling low
Simplicity helps retention: Allocation funds had the smallest return gap, as automated strategies reduced investor error and frequent trading
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