Enemies of Investing Returns - Timing the Market

I read an article in this week's TIME which stated that while the S&P 500 has returned 11.8% over the 20 years ending in 2006, the average investor earned only a 4.3% return. Let's take a look at how badly the average investor was beaten by the market.

If you invested $10,000 in 1986:
Average Investor: $23,000
Mr. Market: $93,000

Ouch. The average investor barely doubled their money in 20 years. And this was a great 20 year period for the market in general. If the average investor earns only 4.3% in such a great bull market period, then imagine how well the average investor does over a time frame when things don't go as well.

Why such a big difference - market timing. Bad market timing. The lesson here is clear, if you are going to try to time the market, you better be sure you know what you're doing, most people don't.