Morningstar recently released the 2025 edition of the Mind the Gap study (pdf available here).
The study looks at how investors actually performed in their funds (i.e., accounting for the timing of cash inflows and outflows) as compared to the reported performance of the funds themselves over the same period of time.
There are a variety of takeaways from the study, but there are two results that stand out to me:
- Investors did well with “allocation” funds such as target-date funds and balanced funds.
- Investors did not do well with sector equity funds.
One of the most noteworthy things is that we see those two results every time.
People consistently have a performance gap with sector equity funds. And that doesn’t surprise me at all. An asset allocation that was crafted without the influence of performance chasing usually does not include any sector funds.
And people consistently have good performance (relative to the performance of the funds themselves) with allocation funds such as target-date funds and balanced funds. And that is also entirely unsurprising. The whole point of funds like that is to just buy them and leave them alone. And most people do exactly that.
Other Recommended Reading
- Does Long-Term-Care Insurance Add Up? from Christine Benz
- Harder Than It Looks from Adam Grossman
- The Human Toll of AI from Ben Carlson
- Boomers Need Alternative Forms of Housing (as Does Everyone Else) from Harry Margolis
- Why Do Desired Stock Allocations Differ from Actual Holdings? from Jean-Pierre Aubry and Yimeng Yin
- America’s Housing Paradox, Hiding in Plain Sight from Katie Gatti Tassin
- Disability Insurance: Financial Planning’s Great Blind Spot from Darin Carroll et al.
Thanks for reading!
Hi. I'm Mike Piper, the author of this blog. I'm 
