U.S. Individual Investors Fear Pullback, But Data Shows Selling Hurts Returns

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According to The Motley Fool, U.S. consumer sentiment fell to new lows in May as individual investors, fearing market pullback, consider selling positions despite record highs across major indices. However, research by DALBAR shows this impulse often backfires. Retail investors achieved an average annual return of just 2.8% between 2001 and 2020, trailing the S&P 500's 7.5% annual gain over the same period. Frequent and poorly-timed market entries and exits are a key reason for underperformance, with data highlighting that even professional institutions struggle with accurate market prediction.
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