“Given that inflows into stock mutual funds in January were the third highest in history, it’s easy to wonder: Are investors setting themselves up for a fall? Buying in January, after all, meant buying after huge runs in 2003 for the S&P 500 and the Nasdaq — 26 percent and 50 percent, respectively.
And investors have been known to chase performance, buying on the way up, if not at the tippy top.
That’s what happened in February 2000 and January 2000 – the eve of a three-year bear market. Those months rank as No. 1 and 2 in terms of net flows to stock funds. Then, as stock prices sank lower and lower, individuals sold, with net outflows from equity funds in 2002.”
Are investors being set up for a fall?
Flows into stock funds haven’t been this high since right before the bubble burst in 2000.
CNN/Money, March 5, 2004: 3:42 PM EST