1 chart shows just how badly average investor lags — even cash

The chronic underperformance “suggests investors’ timing of asset allocation decisions must have been particularly poor, i.e., investors consistently bought assets that were overvalued and sold assets that were undervalued. They bought high and sold low,” he said. 

As for the beaten-down average investor, Bernstein thinks persistently poor timing is the result of volatility – or more specifically, investors’ reaction to increased volatility. Simply put, they tend to run away when things start getting chaotic. 

“History suggests that the best investment  opportunities are in asset classes that investors shun. We strongly feel investors’ ongoing fear of U.S. equities continues to offer substantial opportunity,” Bernstein says.

DYI Comments:  I agree with the general thrust of the article that average Joe saver/investor is a performance chaser just as dogs chase cars and to make matters worse they are despondent sellers especially at market bottoms.  Of course without these folks (including the so called professional investor who reacts the same way)  the market would never have its great rises and falls. The intelligent investor is one who shuns market timing and replaces it with market pricing.  Currently today based on dividends, the market's price to dividend ratio is now 117% greater than the average (23 or 4.42%) creating a very expensive market.  Poor returns will follow is the neighborhood of 0% to 2% over the next ten years. Whether there will be additional speculative returns going forward is always possible even if it is substantial as Bernstein mentions.  However value in the long run will play it self out by regressing back to the mean and as market always do - over shoot.

DYI