Barry Ritholtz, Chief Market Strategist for the Maxim Group and author of the excellent blog, The Big Picture, posts a piece by BMO Nesbitt on why investors fail:

“Individuals have historically underperformed the markets, earning just 2.6% vs. the S&P 500 gain of 12.2% between 1984 and the end of 2002*. Research in the U.S. has shown that this dramatic underperformance comes as a direct result of client behaviour, or more specifically, the attempt to avoid bad performance while seeking out better returns.“

* "Quantitative Analysis of Investor Behavior", Dalbar Inc., July 2003

This data would argue that for the average investor trying to do it on their own it may be best to invest in the market itself, through an index fund or ETF such as the SPY, DIA or QQQQ. Using individual stocks on the side to, hopefully, enhance the performance of your market tracking positions. You won't ever feel as if you are getting left behind by the market and in slow periods, like we are in now, a good stock picker has the great possibility of out performing, possibly significantly.

Here is the original piece by BMO Nesbitt

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