Quantitative Analysis of Investor Behavior

The 2017 Report is coming in March!

Since 1994, DALBAR's Quantitative Analysis of Investor Behavior (QAIB) has been measuring the effects of investor decisions to buy, sell and switch into and out of mutual funds over both short and long-term time frames. The results consistently show that the average investor earns less – in many cases, much less – than mutual fund performance reports would suggest.

The goal of QAIB is to continue to improve the performance of independent investors on the one hand and of professional financial advisors on the other hand by incorporating the factors that influence behaviors that determines the outcome of investment or savings strategies. QAIB offers guidance on how and where investor behaviors can be improved.

QAIB 2017 examines real investor returns in equity, fixed income and asset allocation funds. The analysis covers the 30 year period ending December 30, 2016, encompassing the crash of 1987, the drop at the turn of the millennium, the crash of 2008 plus recovery periods of 2009, 2010 and 2012. No matter what the state of the mutual fund industry, boom or bust: Investment results are more dependent on investor behavior than on fund performance. Mutual fund investors who hold on to their investments are more successful than those who try to time the market.

Advisor Edition Usage Rights

Purchase of the Advisor Edition of QAIB includes the rights to redistribute printed or electronic copies, of this complete report to clients. Please Note: The purchase of this report does not include the rights to replicate or reproduce charts and data elements separately in customized materials. In addition, purchase of the Advisor Edition of QAIB includes the rights to post this report on your company’s internal password protected website. The rights to post to the World Wide Web are not included. 

Truths About QAIB

Lone wolf claims DALBAR and SEC math is WRONG!

March 2017

The math used in DALBAR's QAIB report, which is precisely what the SEC has established as the standard for calculating annual investment returns, is under attack as being incorrect. A lone wolf has claimed that this SEC formula is flawed because it does not employ an “internal rate of return” approach!

By using the SEC standard, DALBAR is confident that the math used in its calculations is consistent with what regulators require.

Answering Fiction about Investor Returns with Facts

April 2016

The Quantitative Analysis of Investor Behavior (QAIB) was created to set reasonable investor expectations of investment returns and identify opportunities for investors to improve their returns.

QAIB is not and has never been an academic exercise but is a tool that reflects the way investors view their investments and how they determine the profits or losses they have. To that end, QAIB takes the most often used approach to calculating investor returns… Profits made on funds invested over a specific timeframe. This is also consistent with guidelines from the IRS and the SEC.

The most recently published fiction about QAIB is addressed here with the basic facts.

The Fiction: The 7 Worst Offenders
  1. QAIB blames low returns on dumb investors.
  2. QAIB blames only voluntary investor behavior for low investor returns.
  3. QAIB excludes expenses that make investor underperformance worse.
  4. QAIB returns canNOT be compared to fund returns as asset weighted returns can.
  5. QAIB uses a "quirky formula of its own".
  6. QAIB calculates returns based on "total assets at the end" of a period.
  7. QAIB returns are inaccurate because they are compared to an index rather than to the funds themselves.
Why the Fiction?

The reasons for creating fiction about QAIB fall into three categories:
  • Failing to understand what investor return really is… simply the money earned by investors over some specific period of time.
  • Discounting the disparity to maintain investors’ ignorant bliss… higher investor returns presents a more optimistic picture.
  • Simplistic views that ignore critical investor perceptions… such as the cost or benefit of not being invested during the period being measured.
The Facts

The truths about the 7 worst offending lies are discussed in the following sections. This section will be expanded when further questions arise or if amplification is needed.

1. QAIB blames low returns on dumb investors.
Nothing in the 20 year history assigns any blame to investors. Four factors cause the gap between investor returns and an appropriate index:
  • Availability of capital to investors for the entire period being measured.
  • Need for capital by investors before the end of the period being measured.
  • Expenses and under performance of the funds.
  • Investors’ irrational behavior, based on generally accepted but misleading opinions.
2. QAIB blames only voluntary investor behavior for low investor returns.
As indicated in #1, there are four factors that cause the low returns. Voluntary investor behavior is one of the causes.

Voluntary investor behavior includes:
  • Delaying an investment decision
  • Withdrawing funds before they are needed or withdrawing from a less than optimal source.
  • Reinvesting after there is evidence of a market recovery.
3. QAIB excludes expenses that make investor underperformance worse.
QAIB measures assets after all costs and expenses are deducted and flows after all sales charges are paid.

While some measures attempt to make adjustments for differing share classes and expense ratios, QAIB makes no such adjustments since only net assets and net flows are used.

4. QAIB returns canNOT be compared to fund returns as asset weighted returns can.
QAIB reports the returns that are most visible to most investors, the investor’s personal return and the most widely used indexes.

The decision to compare the most visible measures of return allows QAIB to reflect the investors' perception and therefore to properly define the problem. Having defined the problem, methods have been developed and are being developed to narrow the gap between these two measures. QAIB presents an "investor's" view of the fund.

Asset weighted returns by definition ignore the time during which the investor is out of the investment and do not provide a measure of the lost opportunity. As such asset weighted returns are a “fund’s” view, reflecting only returns when money is in the fund.

5. QAIB uses a "quirky formula of its own".
The description of the QAIB calculation as being "quirky" or something that is exclusive to QAIB is utterly ridiculous.

The QAIB calculation is consistent with or similar to the formula used by mutual funds, brokerage firms, insurance companies and retirement plan providers who report investor returns to their clients.

The QAIB formula is based on the IRS guidelines for calculating gains and losses. The annualization of returns uses the SEC formula for that calculation.

6. QAIB calculates returns based on "total assets at the end" of a period.
This use of the term "total assets at the end" was an unfortunate paraphrase of the term used in the report, "cost basis".

It is unfortunate that the inventor of the phrase "total assets at the end" and those who repeat it are unaware of the enormous difference in meaning of the two terms.

7. QAIB returns are inaccurate because they are compared to an index rather than to the funds themselves.
Comparing investor returns to fund returns is useful when the goal is to reach no further that what funds can earn.

QAIB takes the approach, that the ultimate goal is to perform better than the market average and thus uses the market average as the benchmark.

QAIB Quarterly

Average Investor Returns are Now Available on a Quarterly Basis!

Why wait until the end of the year to quantify Investor Behavior? Receive quarterly newsletters with average equity, fixed income and asset allocation fund investors for the quarter and YTD. QAIB Quarterly includes the 2016 Full Study.

QAIB Products

The 2017 Report is coming in March!

DALBAR's Quantitative Analysis of Investor Behavior (QAIB) celebrates its twenty-first edition of measuring the shortfall in retail investor real returns.

Click on any of the products below for details, pricing, and to buy online!

Active v. Passive Report
Active v. Passive Investor Returns
For Distribution

Learn the extent to which the historical performance advantage of passive investments is eroded by the behavioral influences.

May be used in advertising and deliverable to clients/advisors.

Includes a complimentary copy of the 2017 QAIB Full Study! When it is released in March.

Active v. Passive Report Not for Distribution
Active v. Passive Investor Returns
For Internal Use

Learn the extent to which the historical performance advantage of passive investments is eroded by the behavioral influences.

Internal use only. May NOT be used in advertising and deliverable to clients/advisors.

Includes a complimentary copy of the 2017 QAIB Full Study! When it is released in March.

Active v. Passive Advisor Edition
Active v. Passive Investor Returns Advisor Practice Edition (Highlights Only)

Learn the extent to which the historical performance advantage of passive investments is eroded by the behavioral influences.

Personalized with name of practice for client distribution.

FOR A LIMITTED TIME...Includes beta program access to the AVP Calculator

PreOrder Version
2017 Pre-Order Full Version
DALBAR's 2017 QAIB Full Study for the period ended 12/31/2016. This study includes everything that is QAIB, as well as copyrights to its entire contents.
Managing Investor Behavior
Managing Investor Behavior

A chronical of investor behavior cures that have been featured in the annual QAIB study over the past 20 years.

BICE Training
BICE Training

Get up-to-date now on BICE and/or potential alternatives to implementing BICE.



Budgeting for BICE
Budgeting for BICE

Briefing Paper: Estimating expenditures, revenue loss and strategic consequences

For more information about DALBAR's QAIB online store, please contact Cory Clark at 617.624.7156.