Stats › Active, passive and flows › Retail performance
How retail investors actually do
This is the page about how individual investors actually do, measured from real account records rather than from what people say about themselves afterwards. It isn't flattering, and I want to be careful about how it gets read, because the finding is narrower and a lot more useful than 'retail loses money'.
What the research keeps landing on, across four decades, different countries and completely different cost structures, is that trading more makes individual investors poorer. Not being wrong about companies. Frequency. The same households, choosing from the same stocks, in the same market, over the same six years, ended up seven percentage points a year apart depending on how often they traded. That's the variable, and it's one you control. The page also covers two specific mistakes that have been measured rather than just theorised about, and it deals with the obvious objection that commissions have gone to zero since these studies were written.
I put this together because I teach algorithmic trading, and this is the literature I'd want anyone to read before they build anything. Five sources, all academic papers, all linked at the bottom with the periods they cover. They're free and they're readable, and the tables in them are considerably more convincing than my summary of them.
The finding that has replicated most reliably in behavioural finance is that trading more makes individual investors poorer. Across 66,465 US households from 1991 to 1996, the average earned 16.4% net against the market's 17.9%, but the most active fifth earned 11.4% against 18.5% for the least active, a gap of 7.1 percentage points a year between people holding the same kinds of assets. In Taiwan, individuals lost 3.8 percentage points a year in aggregate, worth 2.2% of GDP, while institutions gained 1.5. Among Taiwanese day traders, 75% quit within two years and fewer than 3% were predictably profitable.
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Below this point there are 9 sections, 1 chart and 5 named sources, roughly 2050 words of it. Every figure carries the source it came from and the date the data is from.
You can keep browsing every statistic in the library for free. The intro and the summary are always open.