Stock Funds Lure Most Cash in 13 Years as Market Rallies

According to Bloomberg,

Investors are pouring more money into stock mutual funds in the U.S. than they have in 13 years, attracted by a market near record highs and stung by bond losses that would deepen if interest rates keep rising.

Stock funds won $172 billion in the year’s first 10 months, the largest amount since they got $272 billion in all of 2000, according to Morningstar Inc. (MORN) estimates. Even with most of the cash going to international funds, domestic equity deposits are the highest since 2004.

The move marks a reversal from the four years through 2012, when investors put $1 trillion into fixed income as the financial crisis drove many to redeem from stocks and miss out as the Standard & Poor’s 500 Index almost tripled from its low. Rare losses this year in core bond portfolios, coupled with a 25 percent gain in the S&P 500, spurred the switch back to equities that some professionals call risky performance chasing.

New York Stock Exchange

New York Stock Exchange

“The timing of retail investors tends to be terrible,” said Jonathan Pond, an independent financial adviser in Newton, Massachusetts, who oversees $200 million. The deposits may be a contrarian indicator of a market near a top, he said.

Jeremy Grantham, chief investment strategist at Boston-based money manager Grantham Mayo Van Otterloo & Co., told clients in a letter this week, “We will have the third in the series of serious market busts since 1999.” BlackRock Inc. Chief Executive Officer Laurence D. Fink said this month that stocks may decline as much as 15 percent because of political risks in China, Japan, France and the U.S.

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