Most people buy high and sell low; that’s the reality. Investors tend to be inveterate performance chasers: We pile into a mutual fund that has outperformed only to pull out at the first major decline.

But even the best mutual funds periodically suffer steep drops, particularly when navigating the treacherous bear markets of the past dozen years.

To invest successfully, you need to honestly assess your tolerance for loss. You might think you have the steely disposition necessary to buy low and sell high, or to at least stick with a market-beating mutual fund through thick and thin. But do you really?

Fortunately, there’s a metric that can help you select those top-performing funds that are least likely to cause you to sell during periods of market turmoil: It’s called investor return.

Of course, volatility gauges, such as standard deviation and risk-adjusted return, attempt to do the same thing, but they can seem hopelessly obscure to most investors.

Instead, investor return attempts to replicate the returns of the average investor in a mutual fund by adjusting a fund’s total return according to the inflow and outflow of investor dollars. As such, investor return reflects the average return on all dollars ever invested in the fund.

Over long-term periods—10 years or more—a fund’s investor return is almost always lower than its total return. That’s because most investors don’t buy and hold, even when they’re in a top-performing fund.

Investor Return vs. Total Return

Over the past year in Fund Favorites, I’ve profiled a dozen mutual funds that span all market caps, as well as the full style spectrum. But one thing they all have in common is superior long-term returns. Over the trailing 10-year period, these 12 funds have gained an average of just over 11 percent annualized, far surpassing the market’s almost 7 percent annualized gain. And even the fund with the lowest return over this period still beat the market by 1.4 percentage points annually.

So how do these funds stack up when it comes to investor return? To find out, I conducted a study that compared the gap between each fund’s total return and its investor return over different time periods, using performance data calculated by Morningstar. However, it should be noted that investor return data was not available for all the funds over each time period, even though 11 of them have been around for at least a decade.

In studying the results, it became apparent that the trailing 10-year period offered the most instructive sample, and eight of the 11 funds had full data for that period.

The results: The investor return on all eight funds was lower than the total return, indicating that many investors didn’t fully capture the enviable gains these funds produced during the past decade. But, as mentioned earlier, that’s to be expected. What’s most interesting was to see which fund’s investor return deviated the least from its total return.

The winner here was somewhat of a surprise: Conestoga Small Cap (CCASX). Its investor return for the past 10 years was 9 percent annualized vs. 9.7 percent for its total return, just a 0.7 point difference. Even better, Conestoga’s investor return was also the highest among the eight funds for which data were available.

My assumption had been that volatility is the single most important factor affecting investor return. In other words, the greater the volatility, the more likely that investors will abandon a fund at the worst possible time. As such, I had expected a large-cap fund to come out on top, since large stocks tend to be less volatile than the smaller fare in which Conestaga specializes.

Although Conestoga’s portfolio was indeed more volatile than the broad market, it wasn’t nearly as volatile as the small-cap Russell 2000 index. Even more impressive, the fund lost nearly 10 percentage points less than the S&P 500 during the bear market year of 2008. So its risk-averse approach appears to have served investors well.