Mind the Gap 2025

Morningstar

Jeffrey Ptak

Research

22 Pages

Morningstar’s annual Mind the Gap study measures the difference between fund returns and what investors actually earned due to timing of purchases and sales. The 2025 report finds a persistent shortfall, with trading activity, volatility, and fund complexity widening the gap, while allocation funds and lower-cost strategies helped investors capture more returns.

Key Takeaways

Persistent gap: Investors lagged their funds by 1.2% annually over 10 years, losing ~15% of potential gains.
Trading penalty: The most volatile cash flow funds saw 1.8% annual gaps vs. 0.8% for the most stable.
Category impact: Sector equity investors trailed by 1.5% annually, while allocation fund investors lost only 0.1%.
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