Investors acting rationally

Investor behavior is one of the things I’m fascinated by. We go to great lengths on the site to point out the myriad (endless?) examples of how, en masse, the herd runs itself off whatever cliff happens to be nearby on a regular basis.

But every once in awhile, you can find an example of large numbers of people acting responsibly and judiciously. One such example comes to light in a piece at Bloomberg News this week:

The S&P 500 slipped 0.3 percent at 4 p.m. today in new York after a five-week rally sent the index to a record. While unprecedented monetary stimulus from the Federal Reserve and share buybacks approaching record levels helped send the gauge 28 percent above its previous peak in 2007, investors are reluctant to embrace the rally.

In August, they pulled $5.8 billion from funds that invest in U.S. stocks even as the S&P 500 climbed 3.8 percent, data compiled by Bloomberg and the Investment Company Institute show. It was the second month of outflows after almost $20 billion of inflows in the first half of the year.

Equity funds with a global focus and those investing in bonds took in $13 billion and $10 billion in August and added money every month in 2014.

Investors tuning out the noise of the new high and contuing to go about their asset allocation plans is a good thing to see. The lack of a rush into S&P 500-tracking funds after an up-4% August is also refreshing. Investors (and, more than likely, their advisors) continue to add to lagging asset classes like global equities or less exciting asset classes like fixed income, while demurring on more expensive US stock funds or even trimming some gains.



S&P 500 Beating World Most Since 1969 but Doesn’t Spark Flows (Bloomberg)

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