Four American economists have published a study in the Financial Analysts Journal, the CFA Institute’s flagship journal, that challenges one of the most widely cited statistics in financial advice: that mutual fund investors lose roughly 1.2% in returns every year because of bad timing, meaning the tendency to buy shares after markets have already risen and sell them after they have already fallen.

Who is behind the study and why it matters

The paper, titled «Bad Timing Does Not Cost Investors 15% of Their Funds’ Returns», is signed by four academics: Timothy Riley, CFA, a finance professor at the Sam M. Walton College of Business at the University of Arkansas, together with Jon Fulkerson (University of Dayton), Bradford Jordan (University of Florida) and Qing Yan (Towson University).

The Financial Analysts Journal is the peer-reviewed scientific journal of the CFA Institute, one of the most authoritative references for applied investment research. This is not a single bank’s report, but work that has gone through peer review.

The study’s target is Morningstar’s well-known annual “Mind the Gap” report, edited by Jeffrey Ptak, a managing director at the firm. In its 2025 edition (covering 2015-2024), Morningstar estimated the “return gap”, the difference between a fund’s return and what the average investor actually earned, at 1.2% a year. According to the study’s authors, that equals about 15% of the funds’ total gains over the period.

A new 2026 edition of the same report (covering 2016-2025, and not examined by this study) shows a very similar gap: an investor return of 8.7% a year against 9.9% for the funds, or about $3.8 trillion “lost” over ten years across the entire US market. That suggests the contested methodology is still in use.

Why the gap may be overstated

Working from the same Morningstar data framework, the four authors argue that much of that gap does not measure investor mistakes at all, but an almost unavoidable statistical effect: funds with strong recent performance attract more capital even without any deliberate “performance chasing”, and that alone inflates the calculated gap.

Once that effect is stripped out, the study finds, the cost attributable to genuinely bad timing falls to about 0.10% a year. Riley sums it up this way:

«The Mind the Gap study should be interpreted with caution. Its results do not allow clean inferences about the cost of investor timing or of performance chasing»,

adding that «having accurate beliefs is essential to making good decisions: in our case, the starting point for an investor weighing a timing choice should not be that it tends to destroy a significant amount of value».

What it means for financial advice

In Italy, according to the latest report by Consob (the Italian market regulator) on the investment choices of Italian households, 40% of Italian savers relied at least in part on an adviser or a bank employee in 2024, up from 32% in 2022. If the true “cost of going it alone” were ten times smaller than commonly cited, it would not change the value of advice (which remains useful for planning, taxes and discipline), but it would weaken one of the arguments most often used to sell it.

Editor’s note

This article was originally published in Italian on money.it by Ufficio Studi Money.it on October 04, 2026 as «Il cattivo tempismo costa agli investitori l’1,2% l’anno? Uno studio dice che è dieci volte meno». It has been translated and adapted for an international audience by the Money.it International desk.