How investors lost out on 15% of total fund returns over the past 10 years

That’s according to Morningstar’s new Mind the Gap report, an annual analysis of the so-called Investor Return Gap, or the difference between the returns investors actually experienced and reported total returns for various funds. Morningstar’s team estimates that the average investor earned 6.3% per year from 2013 to 2023, a full percentage point less than the average U.S. mutual fund and ETF’s total returns of 7.3%. That gap can largely be accounted for by investors mistiming the market.

That 1.1% difference—Morningstar rounds the actual returns from 6.25% and 7.33% per year—per year might not seem like a lot, but in aggregate it adds up. Morningstar estimates the average investor lost around 15% of total returns generated over the 10-year period.

The difference comes into play because the reported 7.3% return assumes that investors stayed invested for the entire time period. But that’s not how most people actually invest, Morningstar notes. They could make an initial purchase in the middle of the year, for example, or withdraw funds at any point.

“Your return won’t be the same as the buy-and-hold return,” writes Jeffrey Ptak, chief ratings officer for Morningstar. “It’ll be whatever your average dollar earned, given the timing and amount of those buys and sells. If you buy high and sell low, your return will lag the buy-and-hold return.”

And as it turns out, investors are likely to do exactly what they are advised over and over not to—sell when the market is tanking and miss the subsequent rise. While there was a gap between investors’ returns and the funds’ total returns for all 10 years that the study analyzed, 2020 was particularly bad, the research finds. There was a negative 2% gap that year, thanks to wild swings and uncertainty that led average investors to scramble. Investors withdrew money throughout the spring when the market was falling, and reallocated only after the market had started to rebound.

The report underlines why it is so important for investors to keep calm and carry on throughout market swings. Even periodic trading inevitably leads to heartache, Burt Malkiel, author of the bestselling investing book A Random Walk Down Wall Street, previously told Fortune.

“There is such clear evidence by looking at individual investors, you see the ones who traded the most are the ones who lost the most money,” said Malkiel, who is now Wealthfront’s chief investment officer. “Nobody can time the market, don’t try to do it. And if you do, you are much more likely to get it wrong than get it right.”

Additionally, it exemplifies why so many experts like Malkiel encourage investors to opt for low-cost, broad-based index funds rather than trying to pick the best individual stocks or sectors. These funds performed the best of the funds Morningstar looked at, with the lowest Investor Return Gap.

Meanwhile, sector equity funds had the widest gap, with investors’ returns lagging by 2.6 percentage points. Passive funds also vastly outperformed active funds.

“The findings imply that routinized investing, such as making regular contributions to a retirement plan, can itself be helpful in capturing more return,” writes Morningstar’s Ptak. “The more investors can mechanize saving and investing, the less likely it is they’ll engage in costly trading activity. In that sense, it’s addition by subtraction.”