Today's Financial Times published the following letter to the Editor from Terry Smith.
Sir, I refer to Alice Ross's article " Market timing errors prove too costly " (FT Money, November 20). The article quoted Skandia saying that behaviour on its investment platform reflects the fact that many investors buy UK equities in response to what the FTSE has been doing - buying more when it is high and less when it is low - a recipe for poor investment performance adding further justification to the notion that most investors are their own worst enemy.
But this is not new news. The influential Dalbar study in the US has been monitoring mutual fund investment flows for years and concludes that the average investor in mutual funds has significantly underperformed the average mutual fund due to their own behaviour of swapping in and out of funds at the wrong moments.
This might lead you to conclude that the service that fund supermarkets offer in allowing investors to switch easily between funds for no apparent frictional costs is probably doing more damage than good to investor returns.
Combine that with the insurmountable conflict of interest that fund supermarkets have in being paid by product providers rather than their customers, something the Financial Services Authority has shied away from tackling in its recent publication on proposed platform regulation, and I can only surmise that the outlook for retail investors continues to look poor and confused.
Click here to view the full article on FT.com.