Stock Funds Lure Most Cash in 13 Years as Market Rallies

Stock Funds Lure Most Cash in 13 Years as Market Rallies (Bloomberg)

Investors are pouring more money into U.S. stock mutual funds than they have in 13 years, enticed by a market nearing record highs and stung by bond losses that would deepen if interest rates rise further. Stock funds gained $172 billion in the year’s first 10 months, the largest amount since they netted $272 billion in all of 2000, according to Morningstar Inc. (MORN) estimates. With most of the cash going to international funds, domestic equity deposits are the highest since 2004. The move marks a reversal from the four years through 2012, when investors put $1 trillion into fixed income as the financial crisis drove many to redeem shares and miss out on profits as Standard & Poor’s 500 Index almost tripled from its low. Rare losses this year in core bond portfolios, coupled with a 25 percent gain in the S&P 500, spurred a switch back to equities that some professionals call risky performance chasing. “The timing of retail investors tends to be terrible,” said Jonathan Pond, an independent financial adviser in Newton, Mass. New fund deposits may be a contrarian indicator to show when a market is nearing a top, he said.

Paul Dykewicz

Paul Dykewicz is the editor of StockInvestor.com and the editorial director of Eagle Financial Publications in Washington, D.C. He writes and edits for the website, as well as edits investment newsletters, time-sensitive trading alerts and other reports published by Eagle. He also is an accomplished, award-winning journalist who has written for Dow Jones, USA Today and other publications, as well as served as business editor of a daily newspaper in Baltimore. In addition, Paul is the author of the inspirational book, "Holy Smokes! Golden Guidance from Notre Dame's Championship Chaplain." He received his MBA in finance from Johns Hopkins University, where he was a two-time president of the school's Finance Club. In addition, Paul has a bachelor's degree from the University of Michigan and a master's degree in journalism from Michigan State University. Outside of work, Paul volunteers with a faith-based organization to assist the poor in Southeast Washington, D.C., to learn personal finance skills to lift themselves out of debt.