---
title: Fair Weather Money Manager Fan? What Data Tells Us about Short-Term Investments
description: What does data tell us about short-term investments? Have you asked yourself if you're you switching strategies too often? Has it affected overall performance?
image: https://www.letsassemble.com/hubfs/blog-files/What%20Data%20Tells%20Us%20about%20Short-Term%20Investments.png
---

[![Assembly Wealth](https://www.letsassemble.com/hs-fs/hubfs/Assembly/logos/Assembly-Wealth-Logo-Orange-500px.png?width=300&height=70&name=Assembly-Wealth-Logo-Orange-500px.png "Assembly Wealth")](https://www.letsassemble.com/)

The Money Manager People TM

[800-541-7774](tel:+18005417774)

[![RESEARCH MONEY MANAGERS](https://no-cache.hubspot.com/cta/default/10700/7ecbcb66-3fbb-41e3-b219-c24fb3c769c5.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/7ecbcb66-3fbb-41e3-b219-c24fb3c769c5)

[![Client Center](https://no-cache.hubspot.com/cta/default/10700/8691dcb4-caa3-42c2-a810-77b59f461fd2.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/8691dcb4-caa3-42c2-a810-77b59f461fd2)

[Home](https://www.letsassemble.com/)

WrapManager's Wealth Management Blog

When life changes, we can help you thoughtfully respond.

[< Back to read another post](https://www.letsassemble.com/wealth-management-blog)

# Fair Weather Money Manager Fan? What Data Tells Us about Short-Term Investments

Posted by [ Michael J. O'Connor | CWS®, Vice President Investments](https://www.letsassemble.com/wealth-management-blog/author/michael-j-oconnor)  
 September 27, 2017

- [Tweet](https://twitter.com/share)

![What Data Tells Us about Short-Term Investments.png](https://www.letsassemble.com/hs-fs/hubfs/blog-files/What%20Data%20Tells%20Us%20about%20Short-Term%20Investments.png?width=404&name=What%20Data%20Tells%20Us%20about%20Short-Term%20Investments.png "What Data Tells Us about Short-Term Investments.png")Just about every sports fan knows the joy of rooting for your favorite team when things are going well, when the wins pile up. But the opposite can also be true – in those years when your team is “rebuilding” (which is really a euphemism for losing all the time), it’s easy to jump ship and wait it out elsewhere. 

If you think sports fans are fickle or “fair weather,” investors arguably take it to an entirely new level. The research firm DALBAR tracked how often investors “switch teams,” or how often they move from mutual fund to mutual fund and/or strategy to strategy. They collected some fascinating data in the research process, and we’ll dig into their findings below.

### **How Short-Term Investments Translate to Underperformance**

Investors may switch strategies for a multitude of reasons: the manager was/is underperforming, something ‘better’ comes along, the investor reads something in the news that causes them to rethink their approach, and so on down the line. DALBAR lists a slew of psychological, “behavioral finance” type attributes that cause investors to shift strategy so often: loss aversion, following the herd, regret, etc.1 You get the picture.

Based on a 20-year analysis from 1996 – 2015, the research showed that equity mutual fund investors and fixed income mutual fund investors, on average, did not manage to stay invested in their funds for more than 4 years. Considering that many investors have goals and objectives that span 20+ years, this is arguably an issue.

 

![Average number of Years the Average Investor Stays in a Mutual Fund Strategy](https://www.letsassemble.com/hs-fs/hubfs/blog-files/Avg_years.png?width=752&name=Avg_years.png "Average number of Years the Average Investor Stays in a Mutual Fund Strategy")

 

There are a lot of reasons ‘short-term investing’ is not a great idea for a person with long-term goals. But one of the main problems cited by DALBAR is *underperformance. *In 2015, the 20-year **annualized** return for the average equity mutual fund investor was 4.67%, while the S&P 500 annualized return over the same period was 8.19%, a gap of 3.52% per year. In dollar terms, that can mean a significant opportunity cost for investors, if one considers the power of compound interest. 

One of DALBAR’s key findings and assessments drives the point home: “over and over, it emerged that the leading cause of the diminished return is the investors’ own behavior. No evidence was found that predictably poor investment recommendations were a material factor.”  

According to DALBAR, a common theme among negative behaviors is that they often lead investors to unnecessarily abandon a sound investment strategy that was designed in accordance with their goals, risk tolerance and time horizon. They go on to say that the best way to ward off these negative behaviors is to commit to a strategy (probably for more than 4 years!) that [focuses on one’s goals](https://www.letsassemble.com/introduction-to-goals-based-investment-planning) and is *not* focused on short-term investment gains or short-term market conditions. The question investors and readers should ask is: *are you switching strategies too often, and has doing so affected your overall performance?*

### **Partnering with WrapManager Can Turn Short-Term Investing into Long-Term Strategy**

The data from DALBAR’s research shows that the average equity and fixed income mutual fund investor has not stayed invested for long enough to reap the rewards that the market can offer for more patient and disciplined investors. The data also shows that when investors react, their behavior can lead to diminished returns.

At WrapManager, one of our goals is to create an investment plan that spans much longer than three or four years – we are often trying to help investors reach their [retirement goals](https://www.letsassemble.com/introduction-to-goals-based-investment-planning) that span the next *twenty *years or more. Doing so, we believe, can help investors avoid some of the mistakes uncovered by DALBAR’s research. If you find yourself switching strategies too often, or think it would be beneficial to partner with someone who takes a much longer-term approach, WrapManager could be a good fit for you. To talk with one of our Wealth Managers about our approach and how we build long-term investment plans, please call us today at 1-800-541-7774 or send an email to [wealth@wrapmanager.com](mailto:wealth@wrapmanager.com).

Source:   
1. [DALBAR's 22nd Annual Quantitative Analysis of Investor Behavior](https://www.letsassemble.com/hubfs/Charts_for_Blogs/DALBAR.pdf)

[Goal Based Investing](https://www.letsassemble.com/wealth-management-blog/topic/goal-based-investing) [Investing 101](https://www.letsassemble.com/wealth-management-blog/topic/investing-101) [Market Volatility](https://www.letsassemble.com/wealth-management-blog/topic/market-volatility)

[![get money manager picks](https://no-cache.hubspot.com/cta/default/10700/d72d98dd-a24b-41d8-9276-e1648f3b09d3.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/d72d98dd-a24b-41d8-9276-e1648f3b09d3)

### Subscribe to Updates

[Subscribe to RSS Feed](https://www.letsassemble.com/wealth-management-blog/rss.xml)

[![New Call-to-action](https://no-cache.hubspot.com/cta/default/10700/ffe2a394-957b-481b-9f80-4ef176bd6aaf.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/ffe2a394-957b-481b-9f80-4ef176bd6aaf)

### Most Recently Published

### Blog Authors

[![Gabriel Burczyk](http://www.wrapmanager.com/hs-fs/hub/10700/file-2347381761-jpg/Athors_Avatars/Gabe-avatar.jpg "Gabriel Burczyk")](http://www.wrapmanager.com/wealth-management-blog/author/gabriel-burczyk)

[**Gabriel Burczyk,**](http://www.wrapmanager.com/wealth-management-blog/author/gabriel-burczyk)  
[Founder & CEO](http://www.wrapmanager.com/wealth-management-blog/author/gabriel-burczyk)

[![Valerie De Vol](http://www.wrapmanager.com/hs-fs/hub/10700/file-2457588837-jpg/Athors_Avatars/Valerie-De-Vol-avatar.jpg "Valerie De Vol")](http://www.wrapmanager.com/wealth-management-blog/author/valerie-de-vol)

[**Valerie De Vol, **IACCP®  
Chief Operating Officer](http://www.wrapmanager.com/wealth-management-blog/author/valerie-de-vol)

[![Seton-avatar.jpg](http://www.wrapmanager.com/hs-fs/hub/10700/file-2344519198-jpg/Athors_Avatars/Seton-avatar.jpg "Seton-avatar.jpg")](http://www.wrapmanager.com/wealth-management-blog/author/seton-mcandrews)

[**Seton McAndrews, **CFP®  
](http://www.wrapmanager.com/wealth-management-blog/author/seton-mcandrews)[Vice President - Investments](http://www.wrapmanager.com/wealth-management-blog/author/seton-mcandrews)

[![Doug Hutchinson](http://www.wrapmanager.com/hs-fs/hub/10700/file-2347381751-jpg/Athors_Avatars/Doug-avatar.jpg "Doug Hutchinson")](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson)

**[Doug Hutchinson,](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson) **[CFA®  
](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson)[Director of Research and Trading](http://www.wrapmanager.com/wealth-management-blog/author/doug-hutchinson)

![Katie - square.png](https://www.wrapmanager.com/hubfs/Katie%20-%20square.png "Katie - square.png")

[**Katie O'Connor  
**Director of Client Services](https://www.wrapmanager.com/wealth-management-advisors/katie-oconnor)

**Important Disclosure Concerning WrapManager Blogs**

Blogs found at this site have been created or supported by WrapManager. The information provided in a blog post prepared by WrapManager or an associated person of WrapManager is generally limited to financial and economic issues, but may include a discussion of general interest items. The views and opinions expressed on this blog are purely the blog authors, and not necessarily those of WrapManager, Inc. Certain blog posts include information pertaining to WrapManager’s investment advisory services and the products and services of unaffiliated money managers. Such information is provided for information purposes only. Accordingly, information provided in a blog should not be construed by any consumer and/or prospective client as a solicitation to effect or attempt to effect transactions in securities or the rendering of personalized investment advice. Any subsequent, direct communication by WrapManager with a prospective client shall be conducted by a representative of WrapManager. Moreover, no client or prospective client should assume content contained on the website serves as a substitute for personalized advice from WrapManager. Different types of investments involve varying degrees of risk, and there can be no assurance that any investment, portfolio or money manager referred to within the blog will be suitable for your individual situation and risk tolerance or will be profitable. WrapManager recommends that you retain a financial professional to provide you with specific guidance regarding your financial situation before investing. Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested.

Although the information included in the WrapManager, Inc. website and blog has been obtained from sources WrapManager believes to be reliable, we do not guarantee its accuracy and information may be subject to change without notice. This website should not be regarded as a complete analysis of the subjects discussed. Information on this site should not be relied upon as a substitute for legal, tax or accounting advice by a professional in your local jurisdiction.

Comments made by third parties are subject to moderation by WrapManager and may not appear on this blog until they have been deemed appropriate for posting. Also, due to the volume of comments received, not all comments will be posted.

WrapManager does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party website linked to WrapManager's web site or incorporated within a blog post. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

 

 

```json
{
  "@context" : "https://schema.org",
  "@type" : "BlogPosting",
  "author" : {
    "@type" : "Person",
    "name" : "Michael J. O'Connor",
    "url" : "https://www.letsassemble.com/wealth-management-blog/author/michael-j-oconnor"
  },
  "datePublished" : "2017-09-27T15:00:00.000Z",
  "headline" : "Fair Weather Money Manager Fan? What Data Tells Us about Short-Term Investments",
  "image" : [ "https://www.letsassemble.com/hubfs/blog-files/What%20Data%20Tells%20Us%20about%20Short-Term%20Investments.png" ],
  "mainEntityOfPage" : {
    "@id" : "https://www.letsassemble.com/wealth-management-blog/what-data-tells-us-about-short-term-investments",
    "@type" : "WebPage"
  },
  "publisher" : {
    "@type" : "Organization",
    "logo" : {
      "@type" : "ImageObject",
      "url" : "https://www.letsassemble.com/hubfs/Assembly/logos/Assembly-Wealth-Logo-Orange-500px.png"
    },
    "name" : "Assembly"
  }
}
```