Which mutual funds are US investors buying?

The US mutual fund market has much more transparency than here in Europe and AMG Data produce weekly returns of flows into different types of asset classes. So far in 2006, flows into equities have beaten flows into bonds ($60bn into equities vs $42bn into bonds). However, within the bond component, investment grade funds (+$41bn) and international bonds (+$7bn) grew at the expense of government bonds (-$5bn) and High Yield (-$3bn).
So how good are retail investors at picking asset classes? At first glance mixed. Comparing flows into High Yield mutual funds in one year and total return in the following year, over the last 6 years retail investors got it right half the time. But when you consider the years only when the returns are above 5% or below -5% they get it right in three out of four years – this year however, being the one they (like many strategists) got wrong.

The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

David Fancourt

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