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Outside the Box: Here’s proof the average U.S. household isn’t the ‘dumb money’

The traditional view in investing is that institutional investors represent “smart money” with their experience, resources and insights, while “mom and pop” are the “dumb money” chasing returns.

However, an analysis of Federal Reserve data about household investing patterns shows the average U.S. household performed better than a diversified hedge fund index — and did it by taking a similar level of risk as hedge funds.

We estimate that since 2003, the average household has earned more than 4.5% a year from their investments. While 4.5% annual return may sound low at first glance, especially given that the S&P 500 SPX, -0.21% returned about 9.5% over the same period, U.S.

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