Stock and Bond Fund Withdrawals by Individual Investors on the Rise

Many individual investors are becoming nervous because of the stock market swings. skeeze / Pixabay

Beginning in early July, 2015, ordinary American investors who have accounts in mutual funds have been pulling money out from both the major types of funds … those that invest in stocks as well as those that invest in bonds. These simultaneous stock and bond fund withdrawals have not happened for two months in a row since 2008, according to Credit Suisse. They estimate that in July alone $6.5 billion were removed from stock funds and $8.4 billion were pulled from bond funds. This outflow from both types of funds continued during the first three weeks of August, during which time investors withdrew $1.6 billion from stock funds and $8.1 billion from bond funds.

Analysts are not sure if this trend is simply an anomaly or if it is an indication that ordinary investors are nervous about the economy and the volatility in the markets.

Usually, when money is withdrawn from one type of fund, it is reinvested into the other type of fund. For example, nervous investors who remove money from equity funds typically deposit the proceeds into bond funds. The fact that money is being withdrawn simultaneously from both types of funds could indicate that small investors are unwilling to take on risk of any kind.

The recent volatility in the markets is unlikely to quell the nervousness. Observers are watching to see if recent trends will cause investors to put their back into bond funds or move more assets into cash accounts.


Opening Bell: 8.28.15

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