Mutual Fund Inflows

According to industry data, December marked the 5th straight month that mutual fund investors caused net outflows from equity mutual funds. This is interesting since the stock market has been on a tear since early March . Typically, individual investors chase the market as it rises but that does not appear to have been true in 2009. Equity based Exchange Traded Funds (ETF's) also saw net declines in the past year.

There are several ways to interpret this information but it shows how nervous investors continue to be about the markets. Assuming some of the net outflows went into bonds or bond funds (under the illusion that these are "safer" investments) these investors could be very surprised if/when rates rise and the value of these bonds/funds decline. Of course it is possible that much of this money is laying fallow on the sidelines waiting for something to bring them back. Time will tell. It is unfortunate , however, that many investors have capitulated and missed the 65-70% upswing over the past 10 months.