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Dalbar, Inc., a leading market research firm, studies investor behavior each year and calculates the performance of average stock and bond investors versus the returns of the major market indexes. Over the 20 years ended 2012, the S&P 500 Index delivered an annualized return of 8.21%, whereas the average investor in stock mutual funds earned only 4.25% annualized over the same period.

You read that right. Due largely to jumping in and out of the market at bad times, and chasing the latest "hot" funds, the average stock mutual fund investor made only about half of what the market delivered. For bond mutual fund investors, the results are even worse over the last 20 years.

Today we’ll look at the latest Dalbar studies which were released in April and show us – once again – that most investors are still their own worst enemy. Dalbar argues that stock and bond investors should stick to a strict “buy-and-hold” strategy and should never get out. We, on the other hand, have long argued that most investors don’t have the temperament to hang on during bear markets and are very likely to bail out at the worst times.

I write about the Dalbar studies every couple of years, and the results are always the same. Average investors in mutual funds significantly under-perform the major market indexes. As we go along today, you’ll see the reasons why the study’s results are so consistent and why Dalbar’s recommended solution hasn’t changed investor behavior in over 20 years. Let’s get started.

In This Issue...

* April surplus

* Dollar tops all

* Aussie falls below parity

* Will the yen remain weaker than 100

In a special Outside the Box today, Keith Fitz-Gerald, Chief Investment Strategist for Money Morning, dissects "Abenomics," the radical, not to say outlandish, fiscal moves that the newly installed government of Japan is making. And Keith has a ringside seat: he spends much of each year in Japan.

In an attempt to cut the Japanese a little slack, Keith comes up with four things that will have to happen for Abenomics to work – but when all is said and done, he says, Abenomics is a recipe for disaster. That does not mean, however, that there is not plenty of opportunity here for short-term profit, and Keith offers a play that is a potential money maker in this volatile Japanese environment.

Today we will touch several bases. We begin with last Friday’s unemployment report which was hailed by the mainstream media, but had a lot of bad news to go with the good. From there we look at the estimated 6.7 million “missing workers” in this economy and ponder if they’re permanently gone from the employment rolls.

Next we look at the latest Gallup poll showing how many Americans rate the economy as excellent, good, only fair or poor. You may be surprised at the results, which aren’t immediately clear in the chart. Following that, we look at some interesting data on mutual fund money flows which show that the love affair with bonds continues, and investor demand for stocks is waning.

Finally, the International Monetary Fund downgraded its global economic forecast recently, including its forecast for the US and most of Europe. I have included the IMF’s graphic that lets you look at each country’s forecast for 2013 and 2014.

By the way, we have a lot of charts and graphs today, so the letter will print longer than usual.