I’ve done a number of articles on dollar-weighted returns in mutual funds.? There are rare cases where the shareholder base is smart, usually in value funds, where the shareholders add more money on declines, and lighten up when things are going too well.

Tonight’s target is the Gold ETF SPDR Gold Shares [GLD].? As with most volatile mutual funds, people tend to get greedy or panic.? They chase performance.? Consider this list of inflows and outflows from GLD. Cash flows are assumed to occur at mid-period.

Date	Cash Flow
9/30/2004	???????????? 13,081
3/31/2005	?????? 2,902,381
3/31/2006	?????? 3,152,826
3/31/2007	?????? 4,129,118
3/31/2008	?????? 5,163,301
3/31/2009	??? 10,326,761
3/31/2010	?????? 8,197,457
3/31/2011	??? (3,046,769)
3/31/2012	?????? 5,499,978
3/31/2013	? (18,958,700)
11/15/2013	??? (4,320,084)
12/31/2013	? (30,887,920)
Dollar-weighted	8.20%
Time-weighted	11.13%
Difference	-2.92%

Versus a buy-and-hold investor, the average holder gives up almost 3% of returns via market mistiming.? Technicians may talk down buy and hold, but buy and hold usually outperforms the average trader.? This is similar to what my friend Josh Brown talks about in his article Flows Don?t Follow Value, They Follow Performance.? Very few investors are rational businessmen, estimating likely returns over their funding horizon.? Rather they chase past success, and flee past failures.

Such has been true of the SPDR Gold Shares ETF.? Say what you will about the cheapness of large ETFs, people will still misuse them.? They will buy late in a bull phase, and sell late in a bear phase.

And so I say to all: Guard your emotions.? Be forward-looking.? Analyze likely value five years out.? Don’t make snap decisions out of regret.? Think about risk control before you buy shares, bonds, whatever.

Now, as a personal aside, it took me around eight years to learn to control my emotions.? Over the last 20 years, I have made at most a handful of errors reacting to bad market events.? I learned to analyze rather than panic back in the 90s.? It doesn’t mean that I am always right, but it does mean that I act.? I almost never react.

As for GLD, be wary about paper gold.? Is it really fully collateralized by audited gold in a warehouse?? There are lots of promises of gold being traded, but how much physical gold could you have delivered to you, should you want it?

That’s all for now.? Be careful in all of your investing; it is easy to err.