Many individuals are afraid to dip a toe back into stocks during the rally but some institutional investors are using ETFs to buy the dips and position for more upside and an improving economy.

Equity-based ETFs have seen inflows in recent weeks while investors continue to pull money from stock mutual funds.

“ETFs are generally believed to represent the investment behavior of institutional investors, while mutual funds are thought to represent retail investors. It’s possible that institutional investors, eyeing recent encouraging housing data, are willing to put money into riskier assets now on hopes the U.S. recovery is picking up steam,” Reuters reports.

“I think this is people buying on the dip,” said Tom Roseen, head of research services at Lipper.

Meanwhile, retail investors have stayed on the sidelines, judging by seven straight weeks of outflows from equity mutual funds.

Individuals were afraid of September, typically a bad month for stocks, and remain fearful after the financial crisis. Aging investors could also be rotating to bonds from stocks to reduce risk in their portfolios.

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