Investing / The Compound Effect
5 Things the Average Investor Forgets
| 2 min | By Heath J. Harris
Dividends did a third of the work. Ten days decided half your return. And the average investor reliably earns less than their own funds. Five well-documented facts most people forget — and what they imply.
Most investing mistakes are not exotic. They are ordinary behaviors, repeated. Five facts, each well documented, that the average investor forgets:
1. Dividends did about a third of the work. From 1940 through 2025, dividend income contributed an average of 33% of the S&P 500's total return decade by decade (Hartford Funds). Investors who think only in price charts ignore a third of where returns actually came from.
2. Ten days decided half your return. Over a recent 30-year period, a fully invested portfolio earned roughly 9.5% annually. Missing just the 10 best days cut that to about 5.3% (Hartford Funds; J.P. Morgan publishes the same math annually). The best days cluster near the worst days — which is exactly when frightened money is on the sidelines.
3. Investors reliably earn less than their own funds. Morningstar's Mind the Gap study found the average fund investor lost about 15% of their funds' total returns to timing — buying after gains, selling after losses. DALBAR's 2025 study showed the average equity investor trailed the S&P 500 by 8.48 percentage points in 2024 alone. Same funds. Different behavior.
4. Two identical average returns can produce very different retirements. Sequence-of-returns risk means a bad market early in retirement — while you are withdrawing — can permanently impair a portfolio that the same returns in a different order would have sustained (Schwab, Capital Group). Averages hide order, and in retirement, order matters.
5. Taxes are a silent line item. Vanguard estimates that asset location alone — placing the right assets in the right account types — can add roughly 0.75% per year in after-tax value. Almost nobody does it on their own.
Which brings us to the study behind all of this: Vanguard's Advisor's Alpha research ("Putting a Value on Your Value," Vanguard Research) estimates that good advice — behavioral coaching, rebalancing, asset location, withdrawal sequencing — adds approximately 3% per year in net returns over time. Behavioral coaching alone accounts for as much as half of that, and it earns its keep precisely in weeks like this one, when a record-breaking IPO is tempting everyone to do something. Vanguard's estimate, not a promise — and it is situational, not annual. But the pattern across every study above points the same direction: the gap between investments and investors is behavior, and closing it is most of the job.