Tortoise wrote:
Does the "average investor" really rejigger his or her portfolio all that often, though?
I think the typical 401k investor just puts money in and forgets about it, which really isn't so bad. But they can get eaten alive by fees, for sure.
When it comes to non-retirement accounts, I think most people believe trading is the way to get rich. The confident ones compare stock tips, brag about buying Apple, watch investing shows, have the stock ticker on their monitor at work, and fawn over IPOs. They usually lose more than they make. The insecure ones turn over responsibility to an active manager of some sort and lose tons of money in fees and churn, but would probably fire their guy if they saw him standing pat for more than a year. Both believe rejiggering is how you maximize returns, and only differ on who they expect to stir the pot. Active mutual fund investors are somewhere in between. They are perhaps more influenced by recency bias in fund performance than anyone else and are happy to move all their money around to the hot manager.
I also have a personal hypothesis that the average Boglehead doesn't follow his own advice for more than a few years at a time. Eventually they get overconfident and fall into group 1 above, or sell everything when the markets tank and take years to get back in. Perhaps they tinker with elaborate index funds or options trading rather than individual stocks, but the end result is eventually the same.
The person with significant investments who truly has a long-term passive strategy that they stick with for a decade or more is exceedingly rare, IMHO.