Investing: Where Fools Rush In

Most hot sectors have already cooled. You need to make a braver move: look hard at ill-performing areas

The investment world is filled with numbers, but these are perhaps the most troubling: according to Vanguard founder Jack Bogle, in the 20 years ending in 2005, the S&P 500 index rose 11.9% annually and the average mutual fund 9.7%, but the average investor realized only a 6.9% return. The difference between the index and the average mutual fund is readily explained by fund costs, including management fees.

Why does the average investor perform so much worse than the average fund? The answer is timing--bad timing. People have a knack for stampeding into a sector as its performance peaks, only to suffer...

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