Most mutual-fund investors are terrible at timing the market: They sell when they should be buying and buy when they should be selling. So it’s encouraging that, after five years of investing in overvalued markets, mutual fund investors ran for the hills last year.
These charts, published by QVM Group based on data from ICI, are through October 2008. Needless to say, stock-fund outflows increased in November (and moderated in December, when the market stabilised).
If the stock market crashes to a new low in Q1 or Q2, which we think is more likely than not, look for outflows to soar. If the current rally continues, which is also plausible, look for flows to stabilise and then eventually reverse.
See Also: Why People Own Bonds