Retail Investors Have Never Had a Real Benchmark. The Industry's Own Data Has Been Saying So for Thirty Years.

Every major index was built for institutions. Not one was built from the ground up for the 162 million Americans who actually need it.

Who retail investors are

Retail investors are not a niche. They are the market.

162 million Americans — 62% of all U.S. adults — own stocks according to Gallup's 2024 survey. Retail trading accounts for 20 to 35% of daily U.S. equity volume according to SEC data. In 2025 retail investors contributed $302 billion in net inflows to U.S. stocks — a 53% increase from the prior year.

This is the largest investing population in the world. And it has never had a benchmark built specifically for it.

Consider what benchmarks do in every other major industry. Airlines benchmark on-time performance and safety records. Hospitals benchmark patient outcomes and readmission rates. Universities benchmark graduation rates and graduate earnings. Professional sports teams benchmark player performance down to fractions of a second. Every major industry that influences society uses objective benchmarks to drive accountability, improvement, and informed decision making.

The financial industry benchmarks institutional investors, hedge funds, pension funds, and endowments extensively. The same industry has never built that tool for the 162 million retail investors whose capital funds the entire system.

Why not?

Three documented reasons.

First — technical barriers. Multi-custodial data aggregation is one of the most complex engineering and operational challenges in financial services. Every custodian produces data in different formats using different identifiers and structures. The consumer-scale secure API infrastructure required to aggregate retail portfolio data anonymously across custodians simply did not exist until recently.

Second — structural conflict of interest. The SEC has stated unequivocally in published guidance that all broker-dealers and investment advisers have at least some conflicts of interest with their retail investors — specifically an economic incentive to recommend products and services that provide more revenue for the firm even if not in the best interest of the retail investor. A verified cross-custodial retail benchmark creates objective accountability that directly threatens that incentive structure. Firms that manage money have no economic interest in building a tool that objectively measures whether they manage it well.

Third — benchmark industry conflict. The financial intermediaries who maintain benchmark indexes generate revenue by licensing those indexes to the funds that track them — and have further enhanced that revenue by selling investible products that track their own indexes. The benchmark industry profits from the current system. A retail peer benchmark built from actual investor portfolios would reduce dependency on their products.

The gap was not accidental. It was the predictable consequence of a system in which no participant with the resources to build a retail benchmark had an economic incentive to do so.

The benchmark they have been given is the wrong one

The S&P 500 tracks 500 large-cap U.S. companies selected by a private committee with no regulatory oversight. It was designed to measure institutional equity performance — not the mixed-asset, multi-custodial reality of how most retail investors actually invest.

If a retail investor holds bonds, international stocks, small-cap positions, or any combination other than pure large-cap U.S. equity — and the overwhelming majority do — comparing their performance to the S&P 500 is mathematically invalid. It measures different things.

Who controls the benchmarks retail investors are given? S&P Global, MSCI, FTSE Russell, and Bloomberg — all private entities, none subject to regulatory oversight of their index construction decisions, all generating revenue by licensing the same indexes to the funds that track them. Approximately $15 trillion in passive assets globally track indexes controlled by these four organizations according to Financial Stability Board data.

Every one of those benchmarks was designed for institutional use. Not one was constructed from real retail investor portfolios. That category has been empty for the entire history of modern financial markets.

What an apples to apples benchmark actually means

This is the distinction that has been missing.

Imagine aggregating every 80% stock / 20% bond portfolio that exists — across every brokerage, every firm, every custodian — and calculating what those investors actually earned. Not what a model says they should have earned. Not what an index returned. What real investors with real portfolios at real firms took home after all the friction of real life was paid.

That is a true benchmark for an 80/20 investor. Not because it is the largest possible dataset — though size matters — but because it is the only comparison that is genuinely apples to apples. Same risk profile. Same real-world constraints. Same market conditions. The only variables are which firm manages the money and which specific holdings were chosen.

That comparison answers the question that no index can answer: given exactly what I own and exactly how much risk I am taking — how am I actually doing?

That benchmark has never existed for retail investors. Until now.

Thirty years of documented consequences

DALBAR has published its Quantitative Analysis of Investor Behavior annually since 1994. The finding has been consistent across every single edition.

The average retail investor chronically underperforms the market — not because the assets are wrong but because of behavior driven by the absence of objective context. In 2024 the average equity fund investor earned 16.54% against the S&P 500's 25% return — an 848 basis point gap, the fourth largest DALBAR has ever recorded. Investors correctly timed market entries and exits just 25% of the time, tying a record low.

DALBAR's own conclusion is unambiguous: investment results are more dependent on investor behavior than on fund performance.

A 2021 study published in the Journal of Finance found that investors with access to objective peer comparison data demonstrated measurably reduced panic selling during market downturns. The mechanism is straightforward — when you know where you actually stand relative to genuinely comparable peers, market volatility stops feeling like a personal failure. Behavior improves because context exists.

The SEC has identified the absence of objective retail performance comparison tools as a structural gap in retail investor protection in multiple published studies. The fiduciary standard — the legal requirement that advisors act in clients' best interests — has no empirical benchmark against which to be measured at the retail level. The standard exists in law. The measurement tool has never existed in practice.

The statistical framework that makes it real

The absence of a retail benchmark was never a theoretical problem. It was a practical one.

Using Cochran's formula at a 95% confidence level with a 5% margin of error, 250 portfolios within a defined risk category delivers 93.8% benchmark accuracy. That is the threshold at which a benchmark becomes statistically defensible — not an estimate, not a model, but a verified measurement built from real investor outcomes.

You do not need every portfolio in the world. You need enough to meet the statistical standard. That number is smaller than most people realize — and the technology required to aggregate it securely and anonymously across custodians now exists.

What the data has always pointed toward

The research did not need a specific platform to identify this gap. DALBAR identified the behavioral consequences of its absence in 1994. The SEC identified the information asymmetry in its retail investor studies. The Journal of Finance documented the behavioral improvement that peer data produces. The Financial Stability Board identified benchmark concentration as a systemic risk.

The call for a verified, apples to apples retail investor benchmark has been in the data for thirty years.

What has been missing is not the evidence. What has been missing is the infrastructure and the will to build it.

That infrastructure now exists. And for the first time retail investors have what the research has always said they needed — a benchmark built from investors exactly like them, at the same risk level, across every brokerage and firm.

Not a model. Not an index. Not a proxy.

A real benchmark. For real investors.

Sources: DALBAR Quantitative Analysis of Investor Behavior 2025. Gallup Economy and Personal Finance Survey 2024. SEC Office of Investor Advocate retail investor studies. Financial Stability Board benchmark concentration reports. Journal of Finance peer comparison and investor behavior research 2021. Behavioral finance research: Thaler (1980), Kahneman and Tversky (1979), Shefrin and Statman (1985). Cochran's formula statistical methodology. This post does not constitute financial advice.