Buy High, Sell Low: Retail Investors Get It Wrong Again


Stock prices jumped by 2% last week, and have reached their 2007 highs. Retail investors? Fund flows indicate they are still on strike --- and missing the party. As usual.

Below is an email I received from Morningstar. So, let's see. The stock market has climbed back to its 2007 highs last week and yet investors, retail investors, continue to yank money out of stock funds. Amazing.

"Morningstar today reported estimated U.S. mutual fund asset flows through August 2012. Long-term mutual fund inflows were just $20.7 billion in August, as open-end U.S.-stock funds tallied yet another month of outflows, losing $14.3 billion.


"Additional highlights from Morningstar’s report on mutual fund flows:

  • Investors poured $26.4 billion into taxable-bond funds ($30.0 billion if ETF flows are included) and another $5.6 billion into municipal-bond funds in August. Altogether, inflows into these funds surpassed $1.1 trillion since the end of 2008 when the Fed cut rates to zero.
  • U.S.-stock mutual funds and ETFs bled $22.4 billion in August, making it the worst month in two years and the fifth worst during the past five years for the asset class.
  • International-stock funds had $2.8 billion in outflows, the group’s worst showing since December 2011.
  • Investors seem to have lost their taste for world-bond and inflation-protected bond funds. These two former market darlings absorbed just over $600 million in combined August inflows.
  • Old Westbury burst on the scene in August with inflows of $1.4 billion, while the American Funds logged another $5.5 billion in outflows."

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