Studies suggest that the economic downturn has fueled the acceleration of investors who are shunning mutual funds and moving to certificate of deposits (CDs), variable annuities and exchange traded funds (ETFs).
In particular, a study by Cogent Research LLC, shows that the percentage of investors who don’t have assets invested in mutual funds increased from 6% to 16% over the last two years. As of Sept. 30, total mutual fund assets were down to $10.6 trillion as compared to $11.6 trillion at the end of August, a drop of 8.7%.
It appears that some of these assets have been shifted to stock and bond funds which have seen net outflows surge to $63.5 billion in September, as compared to $12.1 billion in August, reports Sue Asci of Investment News.
The study, which surveyed 4,000 investors with investable assets of $100,000 or more, found that 37% of the respondents had assets invested in bonds and 44% invested in CDs, up from 32% and 39% in 2006, respectively. Additionally, 25% of the respondents invested in variable annuities, as compared to 19% in 2006 and 9% invested in ETFs, as compared to 7% in 2006.
To further support the findings of the study, Scott Toms, chief investment officer of Cornerstone Wealth Management Group and Daniel Traub, president of Tempo Financial Advisors LLC, have been both shifting away from mutual funds in favor of ETFs, as well.
The current trend definitly seems to be one in which investors are seeking safety and low-cost alternatives, and ETFs are a big part of the movement. Look out when the market rebounds. We’re going to see much more of the same.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.