Money: Time to Do Nothing?

Picking up on the meteorological theme, at left: mutual-fund investors can be a fair-weather bunch too, withdrawing and reinvesting money along with the market’s ups and downs. Problem is, they often act at the wrong time and make less than they would have if they had done nothing at all. While the S&P 500 returned an annualized 12.2% from 1984 through 2002, the average stock-fund investor saw a meager 2.6% yearly gain–which didn’t even outpace inflation (ringing in at 3.1%), according to a recent study by Boston research firm Dalbar Inc. The reason: the average investor held fund shares for just 30 months, often mistiming the market. Bond-fund investors held shares for 34 months on average, for an annualized return of 4.2%, which beat inflation but lagged government and company bond indexes. –B.K.