While New York State Attorney General Eliot Spitzer’s complaint against Canary Capital Partners states that market timing and late trading can cost investors as much as $4 billion a year, another report puts it in terms that may hit home a little harder for many investors. Timing can sap a fund’s returns by as much as 2% a year, according to The Wall Street Journal.

"It’s like having guests crash a party. There is less food to go around for everyone else," Jason Greene, an associate professor of finance at Georgia State University’s Robinson College of Business, told The Journal.

Besides diluting returns, short-term trading jacks up transaction prices and may cause some portfolio managers to have a bigger horde of cash on hand than they otherwise might. Obviously, in a good market, the more money on the sidelines not going to work in the equities markets, the lower the return.

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