CHICAGO, Jan 7 (Reuters) – Using the non-courageous power of
hindsight, it’s easy to look back on the previous year and see
where the “smart” and “dumb” money flowed.
The direction of money last year tells a well-worn tale:
When fear dominates, money moves into safer vehicles such as
bonds and money-market funds.
After 2008, you can hardly blame anyone for still wanting to
avoid volatility. But those who retreated mostly to fixed-income
have missed the better part of a bull market that’s been running
Although the S&P 500 index ended up about 13 percent in
2012, most investor funds flowed away from stocks during 2012.
Investors redeemed money from stock funds for the 19th straight
month through November, 2012, according to Lipper Research, a
division of Thomson-Reuters. Nearly $4 billion was pulled out of
U.S. stock funds in the week ending January 2.
Bond and money-market funds were more like mirages and less
like oases last year. In November, for example, some $95 billion
was added to fixed-income, while $14 billion was redeemed from
stock and mixed-equity funds. The NASDAQ Index climbed
more than 1 percent in November, its best showing for that month
in three years.