Behaviour gap

A fund can have a good decade while most of the money inside it has a mediocre one. That sounds impossible until you watch the flows: money arrives after strong years, in size, and leaves after weak ones — so the average euro invested experiences less of the rise and more of the fall than the fund’s published chart suggests.

Nothing about the mechanism requires foolishness. It requires only normal human wiring: confidence grows with rising prices, fear grows with falling ones, and both feelings ask to be acted on at precisely the wrong time. That is why the gap survives education, experience and intelligence — it is not an information problem.

Which is also why the fix is structural, not motivational. A written Investment Policy Statement settles decisions before emotions arrive; automation moves the money before feelings can intervene; systematic rebalancing forces mild selling into strength and buying into weakness — the behaviour gap run deliberately in reverse.

You can see your own version of the gap, with your numbers, in the behaviour gap tool — and the articles below cover the governance that closes it.