- Posted November 15, 2011
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Investors exit stock funds, shift to bonds in Oct.
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By Mark Jewell
AP Personal Finance Writer
BOSTON (AP) -- Surging stock prices in October weren't enough to entice mutual fund investors back into the market. Instead, bonds continued to hold appeal.
Investors withdrew a net $17.6 billion from stock mutual funds last month, industry consultant Strategic Insight said last Friday. It was the sixth consecutive month of net withdrawals, which total $97 billion over that period.
October's retreat came as the Standard & Poor's 500 index returned nearly 11 percent, its best month since December 1991.
Last month's exit from stock funds appeared to be a reaction to the market decline in August and September, when stocks tumbled more than 12 percent.
"After the ups and downs of recent months, investors seem to be suffering from volatility fatigue," said Avi Nachmany, research director with New York-based Strategic Insight.
Stock funds attracted new cash during the first four months of this year, following last fall's strong market gains. But investors have since returned to their old ways, pulling their money from stock funds and depositing it in bond funds. It's a pattern that became entrenched after the 2008 financial crisis.
That more conservative investing attitude was again apparent last month, when investors deposited a net $20.8 billion into bond funds.
About $18.9 billion of that total went into taxable bond funds, a category that includes corporate bonds. It was the largest monthly flow of money into taxable bond funds since May's figure of $20 billion. About $1.9 billion was deposited last month into municipal bond funds, which buy the debt of state and local governments.
Other details of how investors moved their money in October:
-- Foreign stock funds: Investors withdrew a net $2 billion from these funds, amid persistent worries that European leaders will fail to get a handle on the continent's debt crisis. Year-to-date, investors have deposited a net $47.8 billion into foreign funds, reflecting expectations that long-term growth prospects in fast-growing countries like China will support rising foreign stock prices.
-- Money-market funds: A net $21 billion was withdrawn from these funds, which are designed to be safe harbors where investors can temporarily park cash and quickly access it when needed. Net withdrawals total $215 billion year-to-date. Money-market funds' appeal has dimmed because returns have been barely above zero since early 2009.
-- Exchange-traded funds: Investors deposited a net $19 billion into ETFs, which bundle together investments in a particular market index. Unlike mutual funds, they can be traded during daily sessions just like stocks. ETFs continue to grow much faster than mutual funds, with year-to-date net deposits of $94 billion. At that rate, ETFs are on pace to top $100 billion for the fifth year in row.
Published: Tue, Nov 15, 2011
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