Jim'sMoneyBlog

Financial Opinion and Insights

Data Shows Investors Chasing Returns

Ever since the credit meltdown, investors seem to have been doing what they’ve historically done after most major market turns:  Reacting to headlines. 

During the previous period of `irrational exuberance’, as former Fed Chairman Greenspan referred to it, everyone seemed to be talking about their stock buys or learning to `flip’ houses; but, since the meltdown, gold commercials have been filling the airwaves as investors, many of whom say they are ‘long-term’, have been leaving the stock market.  Those still investing say they are seeking high-dividend stocks, which they consider safer.

Are those seeking safety in gold or value stocks right?  Or, are they just chasing the latest fad?  Does market data confirm their actions… or are individual investors getting it wrong again?

To learn more about this, we’ve called on the folks at JP Morgan Asset Management to supply us with some recent market data, which you’ll hopefully find interesting, if not enlightening.

As you can see, since 2000, there have been only four years when there were net inflows into mutual funds; and, as the chart shows, people exited during the 2008 downturn, and continued exiting even as the market has been recovering.

Meanwhile, as you can see, money has been flowing into bond funds, presumably chasing increasing valuations, despite the fact it also meant declining yields. 

 JPMorgan Chart_MutFundFlows_3-31-12

But, has all this performance-chasing done any good?    You can  see our entire take on this in our eZine for individual investors.   To subscribe, you can use the eZine Sign-Up link on this page.

 Enjoy!

Jim Lorenzen, CFP®, AIF®

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Jim Lorenzen, CFP®, AIF®Jim Lorenzen is a Certified Financial Planner® and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California.  IFG provides investment and fiduciary consulting to retirement plan sponsors and selected individual investors.  IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description.  Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader.  The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional. 

 

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IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description.  IFG does not provide legal or tax advice and nothing contained herein should be construed as  securities  or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader.  The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.  The Independent Financial Group does not sell financial products or securities and nothing contained herein is an offer or recommendation to purchase any security or the services of any person or organization.

Written by Jim Lorenzen, CFP®, AIF®

May 29, 2012 at 8:00 am