It’s common knowledge in my profession that Individual Investors get half the returns of the S&P 500 (sometimes even worse).
The reason is that they think you make money in the stock market by “picking right”.
So they find whatever’s been hot and back up the truck.
Usually, by the time Average Joe finds the hot investment, it’s already run its course.
So soon-ish after they back up the truck, they lose a bunch of money.
Once they reach their pain threshold, they sell at a loss and move their money to the next hot thing.
Rinse and repeat.
The Nasdaq’s been hot all year. Anecdotally, we had a lot of people buy the Nasdaq ETF (QQQ) aka “the Q’s” in their funny money accounts over the last 6 months.
After today’s bloodbath, the NASDAQ’s dropped 9% in the last two weeks, giving back half of the gains this year.
Our FZ Members know to buy and hold, so I doubt they’ll sell in the downturn (which we also preach incessantly against), but I’m willing to bet a whole lot of retail investors have already hit the sell button (or will).
And they’ll probably buy small-caps which have jumped 10% in the last two weeks.
Wanna guess what will happen when small caps hit a correction?
