Small investors continue to pile into stocks after having pulled out of the equity markets at exactly the wrong time last fall and earlier this year. According to TrimTabs equity funds experienced inflows of $14.6B:
Equity mutual funds posted gains of 7.92%, their strongest July gain in more than 40 years. Within that group, stock and mixed-equity funds posted gains of $14.6 billion for July, up from $12 billion in June. Of Lipper’s four major equity macro-groups, the World Equity Funds attracted the largest draw of net new money. Minus outflows, it took in about $8.5 billion for July.
Bond funds had net inflows for the seventh consecutive month in July, attracting $33.4 billion. Sales of lower-quality corporate bonds pushed inflows into fixed income funds higher by 2.12%. Investors looking for higher yielding investments continued to invest in these funds, pushing corporate spreads down.
Money-market funds, however, had a rougher time last month. The group extended a six-month trend of losses by handing back some $48.3 billion during the month, offsetting gains from the other asset classes almost exactly, according to Lipper. The poor performance also dragged down results for fixed-income funds, resulting in net outflows of $14.8 billion.
The timing of the small investor during this bear market has been anything but good. These inflows are an alarming trend for any contrarian investor….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.