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Is It Really Only Institutional Investors Selling?

  • Written by Syndicated Publisher No Comments Comments
    July 31, 2014

    From CNBC/Yahoo Finance: Big money managers may be doing something retail investors aren’t – pulling money out of the market.

    “Last week, investors added $379 million into equity mutual funds (the kind that’s popular with retail investors) according to Thomson Reuters’ Lipper. At the same time, exchange-traded funds focusing on equities – the kind of securities traded by institutional investors – saw a whopping $7.97 billion in outflows.”

    I’m not sure I agree with that assessment that money being pulled aggressively out of ETF’s indicates that only institutional investors are lightening up positions, while retail investors pour more in.

    Money flows into and out of ETFs may have provided that kind of indication a few years ago when they were used predominantly by institutions, hedge funds, and other large investors.

    But in recent years, astute retail investors have pretty much caught onto the advantages of ETF’s over managed funds and end-of-day priced mutual funds.

    One reason to believe that retail investors utilizing ETF’s have also been pulling money out is the way the Russell 2000 has been tumbling. It has given back all its gains of the year and more, now down 2% YTD.

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    It is the home of small stocks, the favorite arena of retail investors, and institutions are pretty much blocked out of such stocks. The small amount of holdings they could achieve with such small capitalization stocks would not make enough difference in their portfolios either way. Due to the $billions they are dealing with, they are pretty much confined to medium to large-cap stocks.

    The money still flowing into end-of-day priced mutual funds is probably from employees still contributing to their 401K and IRA plans and their employers’ matching contributions, and from those with a monthly dollar cost averaging strategy.

    Those two categories of public investors probably contribute most to the pattern I showed in my column two weeks ago (Will Investors Get Out On Time This Time-) which showed how public investors continue to put additional money into the market all the way down in bear markets, and only bail out in disgust after the bear has ended and the next bull market is underway.

    Most public investors may be more astute than that if the profit-taking in the small-cap Russell 2000 is any indication.

    To read my weekend newspaper column click here: China’s Market Finally Looks Like a Buy

    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more. 

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