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Author: Andrew C. Howard

Vice President AthenaInvest, Inc.

The Performance Expectation Gap

LONG-TERM US INVESTMENT PORTFOLIO REAL RETURN EXPECTATIONS (2022-2023 SURVEY RESULTS)

Source: 2023 Natixis Global Survey of Individual Investors, Natixis Investment Managers, Global Survey of Financial Professionals conducted by CoreData Research in March and April 2022.

Financial professionals expect long-term portfolios to generate 7.0% annually after inflation. As of January 2024, inflation as measured by the Consumer Price Index was 3.4%, so this expectation is roughly in line with the average annual return of the S&P 500 index at 10%. Investors, on the other hand, expect to see 19% nominal returns annually from their long-term portfolios.

To put this into perspective, the S&P 500 has generated annual returns of more than 19% in 37 of the past 95 years, or about 39% of years. But the S&P 500 has also generated 26 years of negative annual returns over that same period, about 27% of years, which is why the long-term average ends up being around 10%.

For investors owning a 100% equity portfolio, the financial professional return expectation is reasonable over longer time horizons. But most investors do not own 100% equities, and have allocations to bonds, real estate, commodities, and other asset classes that drive down the 7% return expectation into the 3-4% range. To generate a 19% annual return over time, investors would have to consistently invest their entire portfolio in highly volatile and speculative investments, a sure recipe for disaster.

From the Behavioral Viewpoint


What is Going On?

  1. Investors have Unrealistic Expectations based on limited and Anecdotal Information. Often cherry picking favorable one-off examples or using unreliable information. Anyone looks smart selectively after the fact.
  2. Investors are subject to Myopic Loss Aversion, they feel losses more strongly than gains and want consistent returns in every period. The difficult truth is that investment returns are choppy and uncertain, with losses and gains in any period.
  3. Investors use Heuristics or mental shortcuts and Fallacy of Control to overestimate their ability and level of control. We conclude investing is easy and financial professionals should deliver consistent double digit returns year in and year out.

What can we do?

  1. Tune out the noise and cocktail talk about great investments. Do not kid yourself about how easy successful investing is. It takes time, skill, and discipline.
  2. Reframe your focus to achieving plans and goals over years and decades, rather than abstract and meaningless recent performance numbers.
  3. Learn to understand markets as a long-term return distribution. The more draws from the distribution, the better the outcome. Develop realistic expectations and accept that both positive and negative returns will inevitably occur.
  4. Develop a needs-based plan that separates short-term and long-term investments and stay fully invested over time. Build a strategy-diverse equity portfolio that can be resilient in a variety of market conditions and designed for the long-run.
  5. Work with an experienced financial advisor for coaching to stay on track and to remain focused on long-term goals.

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IMPORTANT INFORMATION AND DISCLOSURES

The information provided here is for general informational purposes only and should not be considered an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  It should not be assumed that recommendations of AthenaInvest made herein or in the future will be profitable or will equal the past performance records of any AthenaInvest investment strategy or product.  There can be no assurance that future recommendations will achieve comparable results.  The author’s opinions may change, without notice, in reaction to shifting economic, market, business, and other conditions.  AthenaInvest disclaims any responsibility to update such views.  These views may not be relied upon as investment advice or as an indication of trading intent on behalf of any AthenaInvest representative.

You are solely responsible for determining whether any investment, investment strategy, security, or related transaction is appropriate for you based on your personal investment objectives and financial circumstances.  You should consult with a qualified financial adviser, legal or tax professional regarding your specific situation.  Investments involve risk and unless otherwise stated, are not guaranteed. Past performance is not indicative of future performance.

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PR Archive

DateLink to Release
July 11, 2023PRWeb  “AthenaInvest Celebrates Over 20 Years Of Behavioral Investing”
June 6, 2023PRWeb  “AthenaInvest Advisors LLC Named to PSN Top Guns List of Best Performing Strategies for Q1 2023”
May 10, 2023PRWeb  “AthenaInvest’s CEO, Tom Howard, Recognized by Investments & Wealth Institute as the Best of the Best in Investment and Wealth Management Industry Awards”
Jul 11, 2021PRWeb  “Behavioral Finance Pioneer Leads AthenaInvest to $500 Million in Total Assets”
May 11, 2021PRWeb  “AthenaInvest Global Tactical ETFs Unsurpassed in Tactical Allocation Category”
Feb 11, 2021PRWeb  “Athena Global Tactical ETFs Portfolio Ranks #1 for Ten-Year Performance in Morningstar Peer Group”
Jan 14, 2021PRWeb  “AthenaInvest’s Behavioral Tactical Approach Excels In Challenging 2020 Market”
Sep 30, 2020PRWeb  “AthenaInvest Global Tactical ETFs Performance Continues With 23rd Consecutive Quarter of 5-Star Overall Rating”
Jan 14, 2020PRWeb  “AthenaInvest Behavioral Tactical Strategy Reaches $300 Million Milestone”
Sep 12, 2019PRWeb  “AthenaInvest’s Tactical Strategy Follows Behavioral Crowds to Earn Consistent 5-Star Performance”
May 16, 2019PRWeb  “AthenaInvest Global Tactical ETFs Delivers Consistent Top-Decile Performance”
Apr 11, 2019PRWeb  “Behavioral Tactical Strategy Managed by AthenaInvest, Now Available as Mutual Fund”
Jan 22, 2019PRWeb  “AthenaInvest Behavioral Tactical Portfolio Delivers Four Consecutive Years of 5-Star Returns”
Dec 18, 2018PRWeb  “AthenaInvest’s Behavioral Tactical Allocation Maintains Consistent 5-Star Performance”
Oct 16, 2018PRWeb  “AthenaInvest Multi-Factor Behavioral Strategy Outperforms”
Jun 27, 2018PRWeb  “AthenaInvest’s Behavioral Tactical Allocation Portfolio Delivers Persistent 5-Star Performance”
Feb 21, 2018PRWeb  “AthenaInvest Global Tactical ETFs Receives 5-Star Morningstar Rating”
Nov 11, 2017PRWeb  “Top Performance of AthenaInvest’s Behavioral Strategy Drives Tactical Portfolio to Major Asset Milestone”
Nov 2, 2017PRWeb  “AthenaInvest Congratulates Richard Thaler, Winner of the 2017 Nobel Prize in Economics”
Aug 1, 2017PRWeb  “AthenaInvest’s Behavioral Approach Continues to Lead Morningstar Tactical Allocation Category”
Nov 16, 2016PRWeb  “AthenaInvest’s Behavioral Portfolio Management Outpaces Peers Again”
Mar 30, 2016PRWeb  “Behavioral Portfolio Management Delivers Performance”
Dec 8, 2015PRWeb  “Behavioral Approach Earns #1 ETF Strategist Ranking”
Aug 6, 2015PRWeb  “AthenaInvest Recognized as ‘Best Tactical ETF Portfolio Manager – USA'”
Feb 25, 2015PRWeb  “AthenaInvest’s Global Tactical ETFs Portfolio Gets Top Ranking for 3 Year Performance”
Feb 18, 2015PRWeb  “C. Thomas Howard of AthenaInvest Releases Second Book: The New Value Investing
Dec 3, 2014PRWeb  “AthenaInvest Wins 2014 Wealth & Finance Alternative Investment Award”
Sep 30, 2014PRWeb  “AthenaInvest Awarded ‘Top Guns’ Performance Recognition for Three Different Strategies”
Jul 29, 2014PR Newswire  “Launch Announced for AdvisorShares Athena High Dividend ETF (DIVI)”
Jun 4, 2014PR Newswire  “AthenaInvest Leads Industry Adoption of Behavioral Portfolio Management”
Apr 17, 2014PRWeb  “Book Released by Hh – Author C. Thomas Howard Ph.D., Behavioral Portfolio Management
Mar 26, 2014PRWeb  “Athena Pure Valuation | Profitability Tops Morningstar’s Small Value SMA Category for 2013”
Mar 12, 2014PRWeb  “Athena Global Tactical ETF Earns Top Performance Ranking”
Sep 9, 2013PR Newswire  “AthenaInvest Pure Valuation | Profitability Portfolio Recognized for Performance”

Publication Archive

DateLink to Publication
Dec 13, 2023Proactive Advisor Magazine  “Do markets predict recessions?”
Jun 21, 2023Proactive Advisor Magazine  “A Different Kind of Bear”
May 1, 2023Investments & Wealth Institute  “Investments & Wealth Institute Awards Recognize Best of the Best in Investment and Wealth Management Industry”
Jan 20, 2023Advisor Perspectives  “Performance Persistence Matters”
Jun 15, 2022Investments & Wealth Institute  “Predicting Returns Using Behavioral Market Barometers”
Aug 20, 2021Proactive Advisor Magazine  “Building Wealth by Avoiding Emotional Errors”
Apr 18, 2021CFA Institute  “Active Equity: “Reports of My Death Are Greatly Exaggerated”
Apr 14, 2021Proactive Advisor Magazine  “Bear Market Behavioral Biases—Are You Sure About That?”
Feb 17, 2021Investments & Wealth Institute  “How Behavioral Finance Is Delivering Alpha”
Jul 15, 2020Proactive Advisor Magazine  “Behavioral finance applied: Strategies, not style boxes”
Jun 22, 2020Advisor Perspectives  “The Dawn of a New Active-Equity Era”
May 6, 2020Proactive Advisor Magazine  “Managing investments in emotionally charged markets: A behavioral framework”
Sep 11, 2019ThinkAdvisor  “Who Loses in a Trade War? Both Sides!”
Jun 24, 2019ThinkAdvisor  “We Don’t Have to Have a Recession”
Feb 18, 2019Advisor Perspectives  “Strategy Based Framework Improves on Style Grid”
Jan 14, 2019ThinkAdvisor  “Strategy Preference Can Indicate Expected Stock Market Return”
Oct 15, 2018ThinkAdvisor  “Don’t Waste Time Predicting the Next Recession”
Oct 1, 2018ThinkAdvisor  “When Does Stock Picking Work?”
Aug 13, 2018ThinkAdvisor  “Identify the Best Active Equity Funds”
Jul 24, 2018ThinkAdvisor  “Strategy-Based Portfolio Construction”
Jul 23, 2018Advisor Perspectives  “Proven Tactical Allocation Strategy Driven by Behavioral Crowds”
Jun 25, 2018ThinkAdvisor  “Think Outside the Style Boxes”
Feb 12, 2018Advisor Perspectives  “How to Know When Active Management Performs Best”
Dec 13, 2017Financial Advisor  “The Economy And Stock Market—The Best Of Times”
Aug 14, 2017Financial Advisor  “Don’t Fear Market Peaks, Enjoy Them!”
Jun 12, 2017Advisor Perspectives  “Life after MPT”
May 26, 2017CFA Institute “C. Thomas Howard Urges Practitioners to ‘View the Markets as They Are'”
May 23, 2017CFA Enterprising Investor  “The Active Equity Renaissance: Renaissance Investment Management Firms”
May 18, 2017CFA Enterprising Investor  “The Active Equity Renaissance: Renaissance Portfolio Management”
May 17, 2017WealthManagement.com  “Shining a Light on “Dark” GDP”
May 9, 2017CFA Enterprising Investor  “The Active Equity Renaissance: Behavioral Financial Markets”
Apr 20, 2017CFA Enterprising Investor  “The Active Equity Renaissance: New Frontiers of Risk”
Apr 17, 2017Financial Advisor  “Rising Rates Bode Well For Stocks”
Apr 7, 2017WealthManagement.com  “The Myth of Low Returns”
Apr 5, 2017CFA Enterprising Investor  “The Active Equity Renaissance: The Rise and Fall of MPT”
Mar 22, 2017CFA Enterprising Investor  “The Active Equity Renaissance: Understanding the Cult of Emotion”
Mar 14, 2017CFA Enterprising Investor  “The Active Equity Renaissance: Rejecting a Broken 1970s Model”
Feb 21, 2017Fund Intelligence  “Behavioral Finance Favoring Stock Market Bullishness”
Feb 17, 2017ThinkAdvisor  “Can the Trump Stock Rally Last?”
Jan 25, 2017Financial Advisor  “Janet Yellen: The Head Groundskeeper Of The U.S. Economy”
Jan 25, 2017MoneyLife Radio  (Audio Download) “Chuck Jaffe interviews Tom Howard”
Dec 20, 2016401(K) Specialist  “Sending Out An SOS: Active Managers Need Help (Or Do They?)”
Dec 16, 2016Bezinga  “Good Behavior With This Active Dividend ETF”
Nov 17, 2016CFA Institute  “Relationship Strain: The Sins of the Active Manager”
Oct 26, 2016Financial Advisor  “Keep Your Politics Out Of Your Portfolio”
Oct 21, 2016The Motley Fool  “Stock-Pickers Rejoice: Markets Aren’t Efficient, Investors Aren’t Rational”
Oct 20, 2016Financial Planning  “Handling the emotion of market declines”
Oct 17, 2016MarketWatch  “Don’t let your emotions over this election influence your investment decisions”
Aug 28, 2016Goldstein on Gelt  (Video) “Dr. C. Thomas Howard – AthenaInvest – Goldstein on Gelt”
Jul 26, 2016CFA Institute  “Is Active Management Dead? Not Even Close”
May 18, 2016401KSpecialist  “The Single Biggest Problem With 401k Product Performance Is…”
Apr 14, 2016MarketWatch  “This is why mutual fund managers can’t beat a stock index more often”
Mar 30, 2016Zacks Equity Research  “5 Global ETFs Beating SPY in Q1”
Jan 26, 2016Advisor Perspectives  “Why Most Equity Mutual Funds Underperform”
Nov 23, 2015Modern Trader  “Active managers actually do outperform if…”
Jul 7, 2015MoneyLife Radio  (Audio Download) “Chuck Jaffe interviews Tom Howard”
Jul 2, 2015AdvisorShares Alpha Call  (Audio) “Behavioral Finance Part 2”
Mar 20, 2015Money  “Are Your Stocks Too Popular?”
Feb 10, 2015ValueWalk  “Are Some Decisions to Allocate to U.S. Equities Due to Survivorship Bias?”
Jan 21, 2015MarketWatch  “90% of fund managers beat the market — but their shareholders don’t”
Jan 19, 2015Ozy  “To Get Rich, Tell Your Emotions to Shut Up”
Jan 14, 2015MoneyLife Radio  (Audio Download) “Chuck Jaffe interviews Tom Howard”
Jan 4, 2015ValueWalk  “Behavioral Bias: How It Affects One’s Investments”
Dec 27, 2014ValueWalk  “Behavioral Portfolio Management [Book Review]”
Dec 23, 2014ValueWalk  “Thomas Howard’s Five Radical Rules For Behavioral Investing”
Dec 11, 2014Money Management Executive  “Is Active Management Best Kept Small?”
Nov 5, 2014Bloomberg Radio  (Audio) “Analyst Calls”
Nov 2014AAII Journal  “Selecting Active Equity Mutual Funds: Don’t Get Caught in the Middle”
Nov 2014Investment & Pensions Europe  “Active Management: The portfolio tax”
Nov 2014Investment & Pensions Europe  “Active Management: Passive skeletons in the active closet”
Nov 2014Investment & Pensions Europe  “Active Management: Diluting by concentrating”
Nov 5, 20149News Denver  (Video) “Taking the emotion out of investing”
Oct 7, 2014The Times  “Stone age rules don’t apply to the stock market, so forget about them”
Oct 3, 2014ETF Trends  “Take A Moment Before You Choose A Dividend ETF”
Oct 3, 2014Horsesmouth  “Behavioral Portfolio Management”
Sep/Oct 2014CFA Institute Magazine  “The Next Paradigm”
Sep 17, 2014Stockopedia  “Do you need to be a psychopath to be a successful investor?”
Sep 9, 2014Advisor Perspectives  “Growing Income and Wealth with High-Dividend Equities”
Sep 2014AAII Journal  “Driving Emotions From Your Investment Process: A 12-Step Program”
Aug 25, 2014ETF Trends  “Different Strokes With Dividend ETFs”
Aug 25, 2014Investors.com  “ETF Managed Portfolio Landscape Sees Consolidation”
Aug 22, 2014Forbes  “Choosing The Right Dividend ETF”
Aug 15, 2014ETF Trends  “An Active Guru ETF with a Dividend Focus”
Aug 15, 2014The Street  (Video) “AthenaInvest Bear ETF Benefiting From Market’s Bad Behaviors”
Aug 14, 2014Bloomberg Radio  (Audio) “Taking Stock: Sansoterra, Murray, Howard”
Aug 13, 2014Forbes  “High-Conviction Dividend Investing: Athena High Dividend ETF”
Aug 13, 2014Zacks  “AdvisorShares Launches Unique Active Global Dividend ETF”
Aug 5, 2014Advisor Perspectives  “The Wealth-Builder Model”
Aug 3, 2014ETF Trends  “Bearish ETFs Help Hedge Against Corrections”
Aug 2, 2014InvestorPlace  “Athena High Dividend ETF – An Unusual Path to Quality Income”
Jul 30, 2014Seeking Alpha  “High Stock Dividends: A Competitive Retirement Income Solution”
Jul 30, 2014etfexpress  “AdvisorShares launches Athena High Dividend ETF”
Jul 30, 2014ETF Trends  “AdvisorShares Introduces New High Dividend ETF”
Jul 25, 2014MarketWatch  “Buy-and-hold investing is impossible”
Jul 23, 2014MarketWatch  (Audio) “Consistency leads to successful investing”
Jul 8, 2014CFA Institute  (Video) “BPM: A New Paradigm for Managing Investment Portfolios”
Jun 18, 2014Forbes  “Managers find bad investment behavior can yield better returns”
Jun 3, 2014Alpha Banker  “Fund manager are star buyer and dunkey seller”
May 24, 2014Stamford Advocate  “Handling volatility for long-term investors”
May 21, 2014Financial Times  “Hard sell: why fund managers underperform”
May 15, 2014Financial Times  (Video) “Behavioural finance wins playing blind”
May 15, 2014Alpha Banker  “Why Behavioral Finance May Be the Future of Stockpicking”
May 8, 2014Seeking Alpha  “Reject The Model, Not The Real World”
May 7, 2014Financial Times  “Use psychology to beat professional stockpickers”
May 3, 2014Morningstar  “5 Cures for Rocky Market Fever”
Apr 2014IMCA Investments and Wealth Monitor  “Behavioral Portfolio Management”
Mar 12, 2014ETF Trends  “ETF Managed Portfolios Gain Traction”
Mar 11, 2014Financial Times  “Specialist ETF managers attract strong inflows”
Feb 28, 2014Reuters Insider  (Video) “Wealth Strategies: Canadian banks weigh on fund performance”
Feb 27, 2014Think Advisor  “Portfolio Managers Are Victims of Bias, Too”
Dec 2013Financial Advisor  “Prepare For The Bear”
Fall 2013Daniels Business Review  “Revolutionizing the Investment World”
Sep 18, 2013Financial Advisor  “Behavioral Finance Understanding Improves Portfolio Performance”
Jun 4, 2013CFA Institute  “Behavioral Portfolio Management: An Alternative to Modern Portfolio Theory”

Lambert Bunker

Mr. Bunker joined Athena in 2009 with more than 25 years of financial services experience and brings deep expertise in strategic planning and business transformation within the industry.

Prior to joining Athena, Mr. Bunker served as CMO for Primitive Logic, a premier systems integrator. From 1995 to 2006 Mr. Bunker held executive positions at Charles Schwab where he was instrumental in implementing Schwab’s fee-based asset management service Schwab Private Client. He was responsible for retail sales and marketing efforts including implementing multi-channel marketing campaigns and advisor tools. He also led online product development efforts including launching Schwab.com and Velocity. Prior to Schwab, he held leadership positions at Wells Fargo Bank and Bank of America in service, operations, and finance. Mr. Bunker started his career with The Crocker Bank as a Financial Analyst in 1985 and by 1987 he became Vice President of First Nationwide Bank.

Mr. Bunker holds a Bachelor’s Degree in Economics from the University of the Pacific and an MBA from Pepperdine University, The George L. Graziadio School of Business and Management. He is also an active board member with the Boys & Girls Clubs of Metro Denver.