Riku from Sifter wrote on LinkedIn about fund returns and the returns investors actually receive in reality.
Because fund investors trade in and out of funds, their returns are lower than the fund returns themselves.
Fund returns are calculated as if an investor had invested their money all at once and kept it invested the whole time. In real life, this does not happen. Money is added, withdrawn, switched, and moved, driven by market conditions and emotions.
In the recent Mind the Gap 2025 report, Morningstar examined the last ten years. During this period, funds returned an average of 8.2% per year, but the actual outcome for investors was 7.0%.