Category: individual investors

Little guy is back in the market

(click to enlarge)

MSNBC ran a story today titled, “Two years after market low, the little guy is back:”

Little-guy investors appear to be on board. Since the beginning of the year, investors have put $24.2 billion into U.S. stock mutual funds, according to the Investment Company Institute. They withdrew $96.7 billion in 2010.

These flows do not include ETFs (exchange-traded funds).  In 2010 investors actually added $93.6 billion to stock funds and ETFs.  This year they’ve already poured $54.2 billion into these funds.  This is an annual pace of over $300 billion, a record (see graph).

The reporter quotes a hapless investor who has managed to get practically every major turn wrong the past decade:

“It didn’t feel right to be back in until now,” says Richard Dukas, who heads a public relations firm in New York City. “I still don’t want to put all my money in the market, but I believe we’ve come through the worst of it.”

After the 2008 financial meltdown, Dukas and his wife converted their 401(k) retirement accounts into cash. They had been burned during the bubble in technology stocks a decade ago, and Dukas says he has been “extremely skittish” ever since.

Now Dukas, 48, says 85 percent of his portfolio is back in mutual funds, although he maintains a small cushion of cash.

Besides a growing belief that the economy will recover, investors cited low interest rates for returning to stocks:

One reason to set aside their reservations: They can’t find a better place to stash their money. The bull market in bonds has ended, money-market accounts are returning 1 percent or less, and the average two-year CD earns no more than 1.5 percent.

“What swayed me is being frustrated having my money parked where it’s earning almost nothing,” says Debra Condren, a New York business consultant, who has been easing back into the market over the last four months.

While the individual – who was run over by the tech, housing, and credit bubbles – is wading back into the pool, the professional has plunged in head first:

Among professional money managers, the shift back into stocks has been more dramatic. A February survey by Bank of America-Merrill Lynch of 270 top investment managers found them more bullish about stocks than at any time in the past decade.

My comment: Congratulations, Bernanke, you’ve sucked everyone right back into the casino.  Fool me once, shame on you.  Fool me twice, shame on me.

Cramer on the public investor

People are getting back in to the greatest game on earth. — Jim Cramer, CNBC‘s “Mad Money,” October 18, 2007

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