Time to Swim Against the Tide?
Posted on August 3, 2010
Filed Under Mutual Funds, Personal Investing, The Economic SceneIs now a good time to invest, or a bad time? We’re asked that question just about every day. The truth is, no one knows for sure, but that doesn’t stop the media from inundating us with opinions. Right now, the normal cloud of uncertainty appears even murkier than usual, thanks to all the headlines about economic growth, government deficits, the potential for inflation or deflation, unemployment levels and the lingering worries about the real estate market.
Each is a legitimate cause for concern. But for those of us who take the long view, the outlook is becoming rosier.
You don’t become a successful investor by buying when everyone else is buying, or selling when the world is dumping stocks. The smart way to buy low and sell high is to see what the crowd is doing, and then do the opposite.
So what is the crowd doing lately? Here’s part of a chart from the Investment Company Institute:
Estimated Flows to Long-Term Mutual Funds
Millions of dollars
| 6/23/2010 | 6/30/2010 | 7/7/2010 | 7/14/2010 | 7/21/2010 | ||
| Total Equity | -1,209 | -199 | -4,228 | -3,186 | -1,321 | |
| Domestic | -1,248 | -283 | -4,176 | -3,150 | -1,525 | |
| Foreign | 39 | 84 | -51 | -36 | 204 | |
Take a look at the figures in the “Domestic” line. What they show is that in the week ending 7/21/10, investors pulled $1.52 Billion out of U.S. stock mutual funds, and about twice that much the week before. This trend of money leaving U.S. stock funds has been happening since May of 2007, and as the chart clearly demonstrates, the outbound flood has not abated.
Are you sitting it out, waiting for some special signal to move back into the US stock market? If yes, you are clearly not alone. But now may be a perfect time to reevaluate your strategy.
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