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Individual Investors Might Return to Stocks at Exactly Wrong Time

By Dan Weil   |   Friday, 28 Dec 2012 08:25 AM

Retail investors have shunned equity mutual funds over the past four years, despite the twofold gain in the stock market, going for bond funds instead.

And some experts are concerned that when individuals finally tune in to the benefits of stocks, the bull market will be over.

"They're always late to the party," Nadav Baum, executive vice president at BPU Investment Management, tells CNBC.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

"If we are getting a true strong market where the fundamentals are good, the companies are buying back stock and they're increasing dividends, that could keep the market going for 10 years. At some point, retail will be back in."

Stock mutual funds have seen a $535 billion outflow since 2008, while bond funds have attracted $950 billion, according to Investment Company Institute data cited by CNBC.

To be sure, exchange-traded funds, many of which are equity related, have seen their assets explode to $702 billion from $370 billion in 2008.

Some experts see individual investors shying away from stocks for a long time.

Ulrike Malmendier, an economist at University of California, Berkeley who studied the impact of the Great Depression on investors’ attitudes toward stocks, tells The Associated Press that many young investors won't fully trust stocks again for another 20 years.

"The Great Recession will have a lasting impact beyond what a standard economic model would predict," she says.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

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