Millions of investors use mutual funds to save for retirement and other long-term goals. But most investors earn far less from their mutual funds than the average returns those funds boast. Why do investors miss out?
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at this question and cites a recent study that shows that over the past 20 years, mutual fund investors have only reaped about half of the average annual return of the stock market. Dan notes that the primary reason is that most fund investors chase performance, buying fund shares after they've already soared, and ending up owning them during periods of subsequent underperformance. Dan concludes that the best way to prevent that mistake is simply to use a buy-and-hold strategy, committing to a fund and sticking with it for the long run rather than letting emotion and market conditions change your strategy for saving for long-term goals like retirement.
Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.