848 basis points. That is how much the average equity investor underperformed the S&P 500 in 2024, according to DALBAR's latest Quantitative Analysis of Investor Behavior report. The index returned 25.02%. The average investor took home 16.54%. Not because they owned bad funds. Not because the market was rigged against them. Because they moved money at the wrong times, flinched at headlines, and convinced themselves they were being prudent.
This is not an anomaly. It extended average equity investors' losing streak to 15 consecutive years of underperforming the S&P; 2009 was the last time they beat the index. Fifteen years. Through bull markets, bear markets, a pandemic, and a rate-hiking cycle that had every pundit calling for a recession that never fully materialized. The market kept delivering. People kept getting in the way.
The compounding consequence of that behavior is almost too painful to write down. A hypothetical buy-and-hold investor who started with $100,000 in the S&P 500 in 2024 ended the year with $125,020. The "average" investor, mimicking the cash flows tracked by DALBAR, finished with just $112,774. One year. $12,000 surrendered to anxiety. Now run that over 20 years.
The Wealth You Hand Back Without Noticing
Over the 20-year period to December 31, 2024, the average U.S. equity investor returned 9.24% annually, compared to the S&P 500's 10.35%. That 1.11% annual gap sounds academic until you map it onto a real number: the S&P market portfolio is worth 22% more than what the average U.S. investor achieved after 20 years. On a $500,000 portfolio, that is roughly $110,000 left on the table. Not stolen. Voluntarily surrendered, one poorly-timed redemption at a time.
The mechanism is not mysterious. Withdrawals from equity funds occurred in every quarter of 2024, with the largest outflows taking place just before a major return surge. People left before the party got good. They always do. DALBAR's "Guess Right Ratio," measuring how often investors correctly time their inflows or outflows, fell to just 25% in 2024, tying a record low. One in four. That is the success rate of active market timing by retail investors in a year when the index ran 25%.
And the post-pandemic era has made it worse. The average return gap was 0.62% before Covid, but has grown to 1.38% since, consistent with trading practices that became popular in the pandemic's wake: day-trading, options, social media-driven positioning. Zero-commission platforms and Reddit threads did not democratize investing. They democratized the ability to make expensive mistakes faster.
The Confidence Problem Nobody Wants to Name
Survey the American public on retirement and the numbers are grim, though not for the reasons the headlines suggest. A majority of American workers say they are behind on their retirement savings; about 3 in 5 say their savings are behind where they should be. Nearly two-thirds of savers worry they will run out of money in retirement, a 10% increase from just last year. Anxiety is rising. Savings rates are falling. The median savings rate dropped to 10% in 2025, down from 12% in 2022.
There is a specific person behind these numbers. Take a 45-year-old Gen X worker, one of roughly 52% in that cohort who have saved 3x their current annual income or less, watching their 401(k) dip 8% in a tariff-driven selloff. They are reading the same breathless coverage everyone else is reading. They are wondering whether this is the one that sticks. The instinct is to do something. To be active. To manage. That instinct is the single most expensive impulse in personal finance.
I will acknowledge the genuine tension here: sequence-of-returns risk is real. The value of $1 million after 10 years when there was a down market at the end of that period is $1,059,088. The value of $1 million after 10 years when there was a down market at the beginning of that period is just $598,417. Timing matters at the margin, particularly in the first few years of drawdown. The answer to that problem is not market timing; it is portfolio construction and a cash buffer. It is not the same as deciding whether to sell your index fund in October because the VIX spiked.
Earnings don't lie. Narratives do. The narrative that disciplined inaction is somehow less sophisticated than active repositioning has cost American investors 15 consecutive years of underperformance and tens of thousands of dollars per household. DALBAR concludes that investment results are more dependent on investor behavior than on fund performance. The market is not the problem. The investor looking at the market is.
Bottom line for your portfolio: The S&P 500 has delivered an average annual return of about 10.4% over nearly 70 years. That number is available to anyone willing to stay in the vehicle and stop grabbing the steering wheel. Automate your contributions. Ignore the quarterly statement when markets are ugly. The 848-basis-point gap is not a wall between you and wealth. It is a door, and it opens from the inside.
