New research challenges Morningstar’s “Mind the Gap” findings, showing mutual fund investors lose just 0.10% annually from poor timing—not the widely cited 1.2% return gap.
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Abstract
Morningstar argues in their annual “Mind the Gap” study that, because of the “timing and magnitude of investors’ purchases and sales,” mutual fund investors fail to capture their funds’ full returns. Their 2025 study estimates that the shortfall, or Return Gap, was 1.2% per year from 2015 through 2024, which is “equivalent to around 15% of those funds’ gains over that span.” This result is often interpreted as evidence that mutual fund investors poorly time their trades. However, we find that, using the same sample, poor timing by mutual fund investors costs them only 0.10% per year.