Fools Rush in Where Angels Fear to Tread
The merits of extending trading hours have been widely discussed recently, including in this column. One of the issues highlighted in this debate is that the ability to trade at any time of the day or night is not always helpful from a strategic point of view and that sometimes less can be more.
This point is made clear in Morningstar’s Mind the Gap 2025 report, which states that while US mutual funds and exchange-traded funds generated an 8.2% aggregate annual total return in the 10 years to the end of 2024 (assuming an initial lump sum purchase), the average trader generated 7% per year over the same period.
That 1.2 percentage point ‘investor return gap’ is explained by the timing and size of investors’ purchases and sales of fund shares during the 10-year period and was equal to around 15% of the funds’ aggregate total return. The more investors traded, the wider the gap between investor returns and total returns became.
According to the best AI models.
Studies show: 98% of day traders lose money within a year.
In an average year, just 1.6% of all day traders are profitable consistently over 5 years.
Individual investors (including crypto traders) underperform market indices by ~1.5% annually… pic.twitter.com/CqnmecumSW
— Crypto Seth (@seth_fin) November 26, 2025
Likewise, funds with more volatile cash flows (cash flow volatility, which acts as a stand-in for trading activity) tended to earn lower dollar-weighted returns than funds with more stable cash flows.
The report noted that too much trading reduced some of the advantages ETFs have compared with standard open-end funds and advised that they are used in a way that does not rely on frequent, spur-of-the-moment trading.
It advised keeping trading under control, which can be done by keeping discretionary trades to a minimum and automating other routine jobs — such as rebalancing — as much as possible.
The report said it was too simple to claim that investors in cheaper funds will keep more of their funds’ total returns than investors in costlier funds, as passive fund investors can also mistime their trades.
The findings showed the risk of chasing returns, which investors are more likely to do with more volatile funds due to those funds’ wider swings in performance.
Don’t Discount the Nuclear Option
Many analysts see artificial intelligence as the theme that gives the strongest long-term investment chance. Despite worries in some areas that stocks closely linked to AI are feeding a bubble, Jeff Bezos and Sam Altman still believe that the excitement will be justified in time.
But the real value lies in spotting the ‘next’ next big thing — the trend that has drawn less attention but could still be a major shift. According to a WisdomTree survey of more than 800 respondents across the UK, France, Germany, Italy, the Nordics, Spain, Switzerland and Benelux, nuclear energy will play a key role in helping technology — including AI — reach its full potential.
Providing huge amounts of steady power to data centres is now a strong focus for the so-called hyperscalers. Data centre power demand is rising fast and nuclear can provide almost zero-emission power that is scalable and runs at all times.
Mobeen Tahir, research director at WisdomTree, notes that Microsoft struck a deal with Constellation Energy last year to reopen Three Mile Island and power its data centres solely for 20 years. Google partnered with Kairos Power to secure several small modular reactors (advanced systems that can be built locally to make data centres energy independent), while Amazon signed multiple deals to source energy from both traditional and small modular reactors.
AI companies are spending billions on deals with each other, which boost their value.
This has helped twenty billionaires tied to AI add $450B to their fortunes in 2025.
Meanwhile, an MIT study found that 95% of companies using AI haven’t seen returns on investment.
Be warned. pic.twitter.com/dOX23VwMl2
— Robert Reich (@RBReich) October 9, 2025
In June, Meta signed a deal with Constellation to extend the life of the Clinton Clean Energy Center for another 20 years to secure nuclear power for its operations.
According to WisdomTree’s thematic universe analysis of all thematic funds and ETFs in Europe, nuclear energy was the top performing theme year-to-date through the end of September.
As well as being a trend on its own, nuclear is also closely linked to another trend in the survey — climate. According to WisdomTree, the link between climate solutions, energy innovation and technology is becoming clearer, and that is where some of the most interesting investment chances are now starting to appear.
The Perils of Home Advantage
Last week we mentioned a report which suggested that European equity markets were more liquid and efficient than the complex mix of exchanges and post-trade systems along national lines would suggest.
We have also looked before at progress towards European capital markets union, so my interest was raised by last week’s publication of AFME’s latest Capital Markets Union – Key Performance Indicators report.
Of note was how private markets are making use of the weakness of the IPO market in Europe compared with the US and Asia. The report states that in 2014, private markets (private credit, private equity, business angels and equity crowdfunding) made up 8% of total new gross funding from capital markets including public and private sources, whereas by last year this had risen to 20%.
AFME also found that promoting retail investment improves market liquidity, estimating that increasing per-person retail savings in capital markets products by 10% improves market liquidity by reducing the value of bid-ask spreads on the local stock exchange by around 6%.
But the most striking part of the report was its view on the continuing debate about finding the right balance between encouraging retail savings and directing funding into domestic companies.
AFME believes that limiting investment to favour local companies would reduce yearly returns for retail investors by 1–2% per year.
This is a strong statement given signs that the UK chancellor of the exchequer is keen to introduce a minimum UK shareholding in tax-free individual savings accounts, despite her government dropping plans for the so-called ‘British ISA’ that would have included an extra allowance for investments in qualifying UK assets.
Critics of the plan have already noted the problem of how to define a ‘UK shareholding’. Any sign that investors would be financially worse off would surely put the idea to rest.
Fools Rush in Where Angels Fear to Tread
The merits of extending trading hours have been widely discussed recently, including in this column. One of the issues highlighted in this debate is that the ability to trade at any time of the day or night is not always helpful from a strategic point of view and that sometimes less can be more.
This point is made clear in Morningstar’s Mind the Gap 2025 report, which states that while US mutual funds and exchange-traded funds generated an 8.2% aggregate annual total return in the 10 years to the end of 2024 (assuming an initial lump sum purchase), the average trader generated 7% per year over the same period.
That 1.2 percentage point ‘investor return gap’ is explained by the timing and size of investors’ purchases and sales of fund shares during the 10-year period and was equal to around 15% of the funds’ aggregate total return. The more investors traded, the wider the gap between investor returns and total returns became.
According to the best AI models.
Studies show: 98% of day traders lose money within a year.
In an average year, just 1.6% of all day traders are profitable consistently over 5 years.
Individual investors (including crypto traders) underperform market indices by ~1.5% annually… pic.twitter.com/CqnmecumSW
— Crypto Seth (@seth_fin) November 26, 2025
Likewise, funds with more volatile cash flows (cash flow volatility, which acts as a stand-in for trading activity) tended to earn lower dollar-weighted returns than funds with more stable cash flows.
The report noted that too much trading reduced some of the advantages ETFs have compared with standard open-end funds and advised that they are used in a way that does not rely on frequent, spur-of-the-moment trading.
It advised keeping trading under control, which can be done by keeping discretionary trades to a minimum and automating other routine jobs — such as rebalancing — as much as possible.
The report said it was too simple to claim that investors in cheaper funds will keep more of their funds’ total returns than investors in costlier funds, as passive fund investors can also mistime their trades.
The findings showed the risk of chasing returns, which investors are more likely to do with more volatile funds due to those funds’ wider swings in performance.
Don’t Discount the Nuclear Option
Many analysts see artificial intelligence as the theme that gives the strongest long-term investment chance. Despite worries in some areas that stocks closely linked to AI are feeding a bubble, Jeff Bezos and Sam Altman still believe that the excitement will be justified in time.
But the real value lies in spotting the ‘next’ next big thing — the trend that has drawn less attention but could still be a major shift. According to a WisdomTree survey of more than 800 respondents across the UK, France, Germany, Italy, the Nordics, Spain, Switzerland and Benelux, nuclear energy will play a key role in helping technology — including AI — reach its full potential.
Providing huge amounts of steady power to data centres is now a strong focus for the so-called hyperscalers. Data centre power demand is rising fast and nuclear can provide almost zero-emission power that is scalable and runs at all times.
Mobeen Tahir, research director at WisdomTree, notes that Microsoft struck a deal with Constellation Energy last year to reopen Three Mile Island and power its data centres solely for 20 years. Google partnered with Kairos Power to secure several small modular reactors (advanced systems that can be built locally to make data centres energy independent), while Amazon signed multiple deals to source energy from both traditional and small modular reactors.
AI companies are spending billions on deals with each other, which boost their value.
This has helped twenty billionaires tied to AI add $450B to their fortunes in 2025.
Meanwhile, an MIT study found that 95% of companies using AI haven’t seen returns on investment.
Be warned. pic.twitter.com/dOX23VwMl2
— Robert Reich (@RBReich) October 9, 2025
In June, Meta signed a deal with Constellation to extend the life of the Clinton Clean Energy Center for another 20 years to secure nuclear power for its operations.
According to WisdomTree’s thematic universe analysis of all thematic funds and ETFs in Europe, nuclear energy was the top performing theme year-to-date through the end of September.
As well as being a trend on its own, nuclear is also closely linked to another trend in the survey — climate. According to WisdomTree, the link between climate solutions, energy innovation and technology is becoming clearer, and that is where some of the most interesting investment chances are now starting to appear.
The Perils of Home Advantage
Last week we mentioned a report which suggested that European equity markets were more liquid and efficient than the complex mix of exchanges and post-trade systems along national lines would suggest.
We have also looked before at progress towards European capital markets union, so my interest was raised by last week’s publication of AFME’s latest Capital Markets Union – Key Performance Indicators report.
Of note was how private markets are making use of the weakness of the IPO market in Europe compared with the US and Asia. The report states that in 2014, private markets (private credit, private equity, business angels and equity crowdfunding) made up 8% of total new gross funding from capital markets including public and private sources, whereas by last year this had risen to 20%.
AFME also found that promoting retail investment improves market liquidity, estimating that increasing per-person retail savings in capital markets products by 10% improves market liquidity by reducing the value of bid-ask spreads on the local stock exchange by around 6%.
But the most striking part of the report was its view on the continuing debate about finding the right balance between encouraging retail savings and directing funding into domestic companies.
AFME believes that limiting investment to favour local companies would reduce yearly returns for retail investors by 1–2% per year.
This is a strong statement given signs that the UK chancellor of the exchequer is keen to introduce a minimum UK shareholding in tax-free individual savings accounts, despite her government dropping plans for the so-called ‘British ISA’ that would have included an extra allowance for investments in qualifying UK assets.
Critics of the plan have already noted the problem of how to define a ‘UK shareholding’. Any sign that investors would be financially worse off would surely put the idea to rest.
