Are you better than Wall Street?

"Individual investors do worse than the market." You've surely read or heard it before. Right behind it often comes the other line: "You're better off handing your money to professionals." Both are repeated everywhere, and almost nobody has opened the studies they rest on. So what is true?

Freedom is a number.

At ExSys, we build tools that make your financial future readable, we write articles that explain how money and the economy really work, and we give you what you need to manage your portfolio yourself.

Today: what the studies really say about individual investors versus the market, limits included.

The answer fits in three sentences. If you buy and sell often, you do worse than someone who touches nothing. If you use leveraged products, you almost always lose. And professionally managed funds do worse than their index in the vast majority of cases, over ten years and more. An index is a basket of stocks used as a point of comparison, like the CAC 40.

What you lose by buying and selling often

The reference study dates from 2000. Brad Barber and Terrance Odean followed 66,465 American households with an account at an online broker, from 1991 to 1996. They ranked them by how often they traded, then compared what each group had earned once costs were paid.

Before costs, the very active households and the very calm ones earned almost the same return. The seven-point gap per year therefore comes from costs: commissions, and the gap between the buying price and the selling price. Every trade has a price, and whoever makes a hundred times more of them pays it a hundred times.

Two caveats. The data are old and come from a single broker, at a time when commissions were much higher than today. But the mechanism hasn't changed: a study of all investors on the Taiwan stock exchange reaches the same result. Individual investors lose on average through their trades, and institutions (banks, funds, insurers) win.

With leverage, it's worse

CFDs and Forex are leveraged products: you stake a small sum to control a much bigger position, which amplifies gains and losses alike. A CFD is a contract that tracks the price of a stock or an index without you owning it, and Forex is the exchange of currencies against each other. In 2014, the Autorité des marchés financiers (the AMF, the French regulator) looked at the accounts of 14,799 active French clients over four years.

• 89.4% of them had lost money over the whole period.
• The average loss was €10,887 per client, the median loss €1,843.
• Stock markets were rising during that time: the CAC 40 (the forty largest French companies), dividends included, gained about 30% between 2009 and 2012. This isn't a matter of bad market conditions.
• Commissions and financing costs accounted for only 14.2% of the losses. The gaps between buying and selling prices weren't disclosed.

This study covers CFDs and Forex, not stocks bought directly. It says nothing about someone who buys a fund and holds it. It says only this: in that segment, losing is the rule, not the exception.

The gap between the fund and the person who buys it

There is a third way to measure. Morningstar, a fund research firm, compares a fund's return with the actual return of its clients, taking into account when each of them put money in or took it out. A fund can easily earn more than its clients, because they came in late or left early. Here is what that looks like over ten years to the end of 2024, for US funds and ETFs (an ETF is an exchange-traded fund that tracks an index):

The gap is 1.2 points per year, or about 15% of the return. It comes from the timing of purchases and sales: people invest more when everything is going well and pull out when it falls. Morningstar points out that this gap isn't always a mistake: someone who invests every month, or who rebalances their portfolio, also shows a gap without having done anything wrong.

To see what 1.2 points are worth, a simple calculation. At 8.2% a year, €10,000 becomes about €106,000 in thirty years. At 7.0%, about €76,000. That's a thirty-thousand-euro gap, with no serious mistake made.

And the professionals?

You might conclude that it's better to delegate. The numbers don't point that way. Every year, S&P Dow Jones Indices publishes SPIVA, a report that compares actively managed equity funds, meaning funds whose managers pick the stocks themselves, with their benchmark index. For US large-company equity funds, at the end of 2025:

And these figures are still flattering. Only 67% of the funds that existed at the start are still there ten years later, 51% fifteen years later, 35% twenty years later. The others closed or merged, often after poor results, which appears in no brochure.

Part of the explanation is costs. According to ESMA, the European securities markets authority, actively managed equity funds cost on average 1.2% a year, against 0.2% for an ETF that simply tracks an index. Take the same return before costs, 7% a year, over thirty years: €10,000 becomes about €54,000 on one side, about €72,000 on the other. This calculation is ours, and it assumes both investments earn the same before costs.

So, on your own or with the pros?

The studies don't name a winner between you and the professionals. They show three things.

• Restlessness is expensive. The more you trade, the more you pay, and the further you drift from the market.
• Costs compound like everything else. One point a year looks small. Over thirty years, it takes away a quarter of the final capital.
• Leverage is the segment where people lose most often: nine clients out of ten lost in the AMF study.

What we don't know, and it needs saying: we found no study covering all French individuals who hold stocks or ETFs. The AMF study covers leveraged products. Someone who buys a broad ETF and no longer touches it appears in none of the statistics above. Give or take, they get the market's return minus their costs.

This article describes facts; it gives no investment advice. Past performance does not predict future performance, and an investment in stocks can lose value.