Skittish mutual fund investors bailed out of mutual funds after last week's troubled waters:
Investors withdrew a net $2.39 billion from global equity mutual funds tracked by TrimTabs Investment Research in the week ended Thursday, a sharp reversal from the $2.73 billion that flowed into the funds during the previous week.
The decline came after the U.S. stock market on Tuesday suffered its biggest one-day point decline since immediately after the terror attacks of Sept. 11, 2001. The sell-off was triggered by a combination of factors, including a 9% decline in the Chinese stock market, persistent worry about U.S. subprime loans and the Japanese yen's sharp appreciation."
This year is looking like a classic example of misplaced fund investor enthusiasm. We saw one of the biggest months of inflows to stock funds in January – just in time to experience this week's drop.
Unlike past drops in stocks, this one started abroad. Of course, unlike previous bull markets, fund investors have been much more enamored with funds investing abroad than previous bull markets. It would not surprise us at all to see fund investors bail on funds in droves – perhaps $100 billion in a few weeks of withdrawals – if the global stock markets fall over 10% in the next few weeks. Much of our fund investing philosophy and metrics are based on avoiding the fund investing herd. We think investors should lighten up on stock funds when others are buying, and increase one's allocation when others are bailing out.
Market Drops, Fund Investors Run
Skittish mutual fund investors bailed out of mutual funds after last week's troubled waters:
Investors withdrew a net $2.39 billion from global equity mutual funds tracked by TrimTabs Investment Research in the week ended Thursday, a sharp reversal from the $2.73 billion that flowed into the funds during the previous week.
The decline came after the U.S. stock market on Tuesday suffered its biggest one-day point decline since immediately after the terror attacks of Sept. 11, 2001. The sell-off was triggered by a combination of factors, including a 9% decline in the Chinese stock market, persistent worry about U.S. subprime loans and the Japanese yen's sharp appreciation."
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This year is looking like a classic example of misplaced fund investor enthusiasm. We saw one of the biggest months of inflows to stock funds in January – just in time to experience this week's drop.
Unlike past drops in stocks, this one started abroad. Of course, unlike previous bull markets, fund investors have been much more enamored with funds investing abroad than previous bull markets. It would not surprise us at all to see fund investors bail on funds in droves – perhaps $100 billion in a few weeks of withdrawals – if the global stock markets fall over 10% in the next few weeks. Much of our fund investing philosophy and metrics are based on avoiding the fund investing herd. We think investors should lighten up on stock funds when others are buying, and increase one's allocation when others are bailing out.