Small Investors Are Choosing Bonds Over Stocks

By on August 22, 2010

Graham Bowley at The New York Times reports on the continued dramatic shift in investor risk appetite so far this year.

Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.

If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked.

Investors are putting their money in what has worked over the past decade.

As investors pulled billions out of stocks, they plowed $185.31 billion into bond mutual funds in the first seven months of this year, and total bond fund investments for the year are on track to approach the record set in 2009.

There is some speculation as to why the de-risking is occurring at the source link below.

SMA Comment: At some point, probably in the not-too-distant future, the crowd will get burned again as fixed income disappoints relative to equities. Bonds may, or may not be in a bubble, but the returns are likely to be sub-par over the next decade.

Source: The New York Times

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