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Contrarian signs in mutual funds?

Started by pkamm, 02/25/2009 07:59PM
Posted 02/25/2009 07:59PM | Edited 02/25/2009 08:03PM Opening Post
I was browsing the mutual fund stats on ici.org and sat down with a calculator and got... um... an interesting result.

Ratio of balances in stock funds to total mutual funds:

Peak (2000): 58.9%
Trough (2002): 38.6%
Peak (2007): 56.9%
December 2008: 38.5%

The implication here is that average Joe mutual fund investor is now mostly 'out of the market', as he was at the last major bear market bottom around September 2002.

And no, it isn't merely due to the devaluation of the funds themselves -- the trends show real cash flow fleeing the stock funds in record amounts in 2008 (in fact many times more than in 2002, the last major outflow year).
Posted 02/25/2009 10:00PM #1
And a net cash outflow year could also be looked upon as a general contrarian indicator just by itself. 2002 saw $27 billion fleeing stock funds, while 2008 saw net outflows of over $200 billion.