Tags: Small | Investors | Dumping | Equities

Report: Small Investors Pull $33.12 Billion From Stocks

Wednesday, 25 Aug 2010 01:07 PM

Small investors withdrew a staggering $33.12 billion from the domestic stock market during the first seven months of the year, according to The Investment Company Institute.

"For a lot of ordinary people, the economic recovery does not feel real," Loren Fox, a senior analyst at Strategic Insight, a New York research and data firm, told The New York Times.

"People are not going to rush toward the stock market on a sustained basis until they feel more confident of employment growth and the sustainability of the economic recovery."

If the pace of this market exodus continues, ICI notes, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, except 2008.

The number of individual U.S. investors has grown dramatically during the past few decades as pensions decreased and workers became more responsible for funding their own retirements.

In fact, half of U.S. households now own shares directly or through mutual funds, which makes the current flight from equities even more glaring.

“At this stage in the economic cycle, $10 to $20 billion would normally be flowing into domestic equity funds” rather than the billions that are flowing out, said Brian K. Reid, chief economist of the investment institute. “This is very unusual.”

Not everyone agrees investors are actually fleeing the market.

“Equity mutual-fund outflows are largely a function of retired people withdrawing their money from the stock market,” notes Felix Salmon at Reuters.

“But those people are increasingly moving away from mutual funds and towards ETFs … people are still putting more money into the stock market than they are withdrawing from it.”

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Small investors withdrew a staggering $33.12 billion from the domestic stock market during the first seven months of the year, according to The Investment Company Institute. For a lot of ordinary people, the economic recovery does not feel real, Loren Fox, a senior...
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