Here’s a fact that should be more famous than it is: the return a fund reports and the return its investors actually earn are two different numbers. And the investors’ number is usually worse — not because the fund failed them, but because of what they did around it. This is the most important idea in investing that almost nobody talks about.

Morningstar runs a study every year called “Mind the Gap.” They compare a fund’s reported return to the return the average dollar invested in it actually earned — accounting for when people put money in and pulled it out.

The latest results, covering the ten years through the end of 2024: the average dollar in US stock funds and ETFs earned about 7.0% per year, while the funds themselves returned about 8.2% per year. That roughly 1.2-percentage-point annual gap is money that existed in the fund but never made it into investors’ pockets — lost to timing. Over a decade, that’s equivalent to giving up something like 15% of the total return the fund produced.

Nobody stole that. No fee took it. Investors gave it away by buying after things felt good and selling after they felt bad.

It’s human. The market drops, fear says get out, so people sell near the bottom. It climbs, confidence returns, so people pile in near the top. Buy high, sell low — the exact reverse of the plan — executed with total sincerity, one emotional decision at a time.

And here’s the part that turns this from depressing into useful: Morningstar found the gap gets wider the more people trade and the more exotic the fund, and it shrinks toward zero for boring, automatic, diversified holdings. Investors in simple allocation funds captured nearly all of their funds’ return. The lesson writes itself — activity is the tax, and calm is the edge.

Nothing costs money here; the point is to do less. First, automate the contribution so money invests on a schedule regardless of how the market — or you — feels that week. That single move removes the biggest decision from your emotions and hands it to a calendar. Second, stop checking daily. Constantly watching the balance is what turns a normal dip into a decision, and decisions are where the gap opens. Pick a review cadence — quarterly is plenty for most long-term money — and close the app in between.

You’re not trying to be smarter than the market. You’re trying to stop being the reason you underperform it.

Most people believe better returns come from doing more — more research, more moves, more reacting. The data says the opposite: for long-term investors, the discipline to sit still is worth roughly a percentage point a year, and a percentage point a year, compounded over a working life, is enormous. The market will do its job. Your job is to not get in its way.

That’s enough for one week.

— Mario

P.S. Know someone who checks their portfolio every day and stresses about it? This is the one to send them. Free to subscribe at macwithintent.com/subscribe.

Educational only — not personalized financial advice. Past performance does not guarantee future results; all investing involves risk, including loss of principal. Figures cited are from third-party research over a specific period and will differ across time frames. Mario Cabral is a CERTIFIED FINANCIAL PLANNER™ professional.