Since 1994, DALBAR's Quantitative Analysis of Investor Behavior (QAIB) has measured the effects of investor decisions to buy, sell and switch into and out of mutual funds over short and long-term timeframes. These effects are measured from the perspective of the investor and do not represent the performance of the investments themselves. The results consistently show that the average investor earns less – in many cases, much less – than mutual fund performance reports would suggest.
The goal of QAIB is to improve performance of both independent investors and financial advisors by managing behaviors that cause investors to act imprudently. QAIB offers guidance on how and where investor behaviors can be improved.
The 25th Annual QAIB examines real investor returns in nearly 30 different categories of investors. The analysis covers the 20-year period to December 31, 2018, which encompasses the aftermath of the crash of 1987, the drop at the turn of the millennium, the crash of 2008, plus recovery periods leading up to the most recent bull market.
The best financial professionals double as behavioral finance coaches of their clients. When markets are down or even volatile, questions will arise from concerned clients and perspective will be needed. The QAIB report and materials give advisors the tools to tell a story, put things into perspective, and deliver the calming messages that are needed to mitigate return-destroying behavior. Such messages include:
The Full Version price is $795 and the Advisor Edition is $99 with additional copyrights made available for $249.
All QAIB products except the Advisor Edition allow the purchaser to use its contents in customized communications. The Advisor Edition does not include the rights to use its contents in customized communications.
The Advisor Edition can only be distributed in its entirety to the Advisor’s clients. However, an additional Copyrights Add-on may be purchased for $249 that allows for data to be used in customized communications.
The Full Version for $795 is the complete report and includes copyrights for purchasers to use the data in customized communications.
The Advisor Edition for $99 is an investor summary and excludes data found in the full version to make it more comprehensible to the average investor. This report is able to be customized for one Advisor and can be distributed in its entirety to the Advisor’s clients. Additional copyrights may be purchased for $249 that allow for data to be pulled from this report for customized communications.
Purchasers of the Advisor Edition are able to brand the cover to display the name of one advisor, his or her firm name, address, phone number and email. This will populate automatically using the information collected during the purchasing process.
Firms may purchase an Advisor Edition of the QAIB report and customize the cover with their logo for firm-wide client distribution for $1,000. Please email QAIB@dalbar.com with your request.
Each item in the QAIB Store has copyright rules. Please refer to the table below for each product.
No. However, the Advisor Edition may be posted in its entirety under a password protected URL for the Advisor to share with clients.
Please email QAIB@dalbar.com to request access to your purchased report.
QAIB uses data from the Investment Company Institute (ICI), Standard & Poor’s, Bloomberg Barclays Indices and proprietary sources to compare mutual fund investor returns to an appropriate set of benchmarks. The study utilizes mutual fund sales, redemptions and exchanges each month as the measure of investor behavior. These behaviors reflect the “Average Investor.” Based on this behavior, the analysis calculates the “average investor return” for various periods. These results are then compared to the returns of respective indices.
QAIB uses the aggregate balances of mutual fund investors each month to calculate investor profits or loss after all performance limiting factors are considered. This reflects the market gain or loss that the average investor would see on a statement. Additional research is used to identify solutions that reduce the underperformance.
Four factors cause the gap between investor returns and an appropriate index:
Voluntary investor behavior includes:
QAIB measures assets after all costs and expenses are deducted and flows after all sales charges are paid. While some measures attempt to make adjustments for differing share classes and expense ratios, QAIB makes no such adjustments since only net assets and net flows are used.
No. QAIB reports the returns that are most visible to most investors, the investor’s personal return and the most widely used indexes.
The decision to compare the most visible measures of return allows QAIB to reflect the investors' perception and therefore to properly define the problem.
Having defined the problem, methods have been developed and are being developed to narrow the gap between these two measures. QAIB presents an "investor's" view of the fund.
Asset weighted returns by definition ignore the time during which the investor is out of the investment and do not provide a measure of the lost opportunity. As such asset weighted returns are a “fund’s” view, reflecting only returns when money is in the fund.
The average investor refers to the universe of all mutual fund investors whose actions and financial results are restated to represent a single investor. This approach allows the entire universe of mutual fund investors to be used as the statistical sample, ensuring ultimate reliability.
QAIB quantitatively measures sales, redemptions and exchanges (provided by the Investment Company Institute) and describes these measures as investor behaviors. The measurement of investor behavior is the net dollar volume of these activities that occur in a single month during the period being analyzed.
QAIB calculates investor returns as the change in assets, after excluding sales, redemptions, and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses and any other costs. After calculating investor returns in dollar terms (above) two percentages are calculated:
Total return rate is determined by calculating the investor return dollars as a percentage of the net assets, sales, redemptions and exchanges for the period.
Annualized return rate is calculated as the uniform rate that can be compounded annually for the period under consideration to produce the investor return dollars.
The Average Equity Fund Investor is comprised of a universe of both domestic and world equity mutual funds. It includes growth, sector, alternative strategy, value, blend, emerging markets, global equity, international equity, and regional equity funds.
The Average Fixed Income Fund Investor is comprised of a universe of fixed income mutual funds, which includes investment grade, high yield, government, municipal, multi-sector, and global bond funds. It does not include money market funds.
The Average Asset Allocation Fund Investor is comprised of a universe of funds that invest in a mix of equity and debt securities.
The Average [Sector] Fund Investor is comprised of a universe of funds that invest solely in companies that operate in related fields or specific industries. The following Average Sector Fund Investors were referenced in this report: Consumer, Health, Financial, Tech/Telecom, Real Estate, Precious Metals, Utilities, and Natural Resources
The Average [Capitalization and Style] Fund Investor is comprised of a universe of funds that are categorized by the types of companies in which they invest:
Small-cap mutual funds invest primarily in companies with market capitalizations of up to $2-2.5 billion.
Mid-cap mutual funds invest primarily in companies with market capitalization that generally ranges from $1 billion to $7 billion or in companies with both small and medium market capitalization.
Large-cap mutual funds invest primarily in companies with market capitalizations which are generally more than $5 billion or in companies with both medium and large market capitalizations.
Growth mutual funds invest primarily in common stock of growth companies, which are those that exhibit signs of above-average growth, even if the share price is high relative to earnings/intrinsic value.
Value mutual funds invest primarily in common stock of value companies, which are those that are out of favor with investors, appear underpriced by the market relative to their earnings/intrinsic value, or have high dividend yields.
Blend mutual funds invest primarily in common stock of both growth and value companies or are not limited to the types of companies in which they can invest.
The Average Equity Index Fund Investor is comprised of a universe of funds that are designed to track the performance of a U.S. equity market index.
The Average Target Date Fund Investor is comprised of a universe of funds that follow a predetermined reallocation of assets over time based on a specified target retirement date.
The Average Alternative Strategies (Alt-) Fund Investor is comprised of a universe of funds that employ alternative investment approaches like long/short, market neutral, leveraged, inverse, or commodity strategies to meet their investment objective. The following Average Alternative Strategies Fund Investors were referenced in this report: Alt-Domestic Equity, Alt-World Equity, Alt – Asset Allocation (“AA”), and Alt-Multisector Bond.
The Guess Right Ratio is the frequency that the average investor makes a short-term gain. One point is scored each month when the average investor has net inflows and the market (S&P 500) rises in the next month. A point is also scored when the average investor has net outflows and the market declines in the next month. The ratio is the number of points scored as a percentage of the total number of months under consideration.
Retention Rate reflects the length of time the average investor holds a fund if the current redemption rate persists. It is the time required to fully redeem the account. Retention rates are expressed in years and fractions of years.
The monthly value of the consumer price index is converted to a monthly rate. The monthly rates are used to compound a “return” for the period under consideration. This result is then annualized to produce the inflation rate for the period.
This infographic tells the story of Quincy and his wife Caroline who inherited $20,000 in 1998. They each took $10,000 and invested it in their own account. They both invested in mutual funds with similar performance but this husband and wife have very different styles when it comes to when and how much to invest. Fast forward 20 years and see how Quincy and Caroline are doing today.
QAIB look-backs take an in depth look at the average investor during specific, noteworthy periods in the stock market’s history.
DALBAR's Quantitative Analysis of Investor Behavior (QAIB) celebrates its 24th edition of measuring the shortfall in retail investor real returns.