Franklin Templeton asked investors whether the S&P 500 went up or down in 2009 and 2010. Of the 1,000 investors surveyed, 66% thought it went down in 2009, while 49% said it declined in 2010.

In reality, the index gained 26.5% in 2009 and 15.1% in 2010.

In another study, Markus Glaser and Martin Weber of the University of Mannheim asked investors what kinds of returns they earned and then checked those investors' brokerage statements to see what they actually earned. On average, investors overestimated their annual returns by 11.6% each year. "The correlation between self-ratings and actual performance is not distinguishable from zero," they wrote.

We know that most investors don't beat the market. Worse, we may not even know it. We are oblivious of our own returns.

The Dow Jones (DJINDICES:^DJI) recently hit an all-time high, even adjusted for inflation. But how many investors think we're still stuck in a lost decade?

I recently asked Liz Ann Sonders, chief investment strategist at Charles Schwab. Here's what she had to say (transcript follows):

Sonders: "This whole notion of a lost decade, we're well past that. In fact, the 10 years ending March of this year, the S&P is up 8.5%, and that's a couple of percentage points better than the long-term norm return for the market. I'm not even sure investors are fully aware of that. I still get questions today -- "Are we ever going to exit this lost decade environment?" -- to which I can now respond, we already have. We're now ahead of the long-term norm." 

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