CHAPTER 9INTRODUCING THE DOW JONES PRING BUSINESS CYCLE INDEX—THE ALL-SEASON ANSWER FOR THE SMITHS

The period between 2000 and 2011 was indeed a rough 12 years for the Smiths and other stock investors, including those who invested passively in an index fund. The challenge was even greater for active investors; the 20-year studies by market research firm Dalbar* show consistent underperformance for them. The average investor, without an understanding of the business cycle, tends to act on emotions and buys when prices are high and sells when they are low. The performance is even worse than a buy-and-hold approach because it shows significant underperformance to even the low returns of passive investors. As the title of this book suggests, investors ...

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