Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Fund Investors Buy-in While ETF Investors Sell-out

Hal M. Bundrick

NEW YORK (MainStreet)--The stock market has become a study of contradictions, as some investors buy in but most check out.

While the stock market is down about 3% for the month-to-date, some investors seem to taking the dip as an entry point, as equity mutual fund investors added $2 billion to their investments. The inflow to stock funds was tracked for the week through August 21 by Lipper.

Mutual fund investors were most enamored with overseas positions, preferring international multi-cap core funds (+$627 million) and emerging markets funds (+$567 million) classifications.

But what do ETF investors know that fund buyers don't? In stark contrast, ETF investors are rushing for the exits.

Exchange-traded fund (ETF) investors took an opposite strategy - in a big way - yanking $11.4 billion from their accounts.

ETF investors were especially pessimistic when it came to domestic equities, as the SPDR S&P 500 ETF (SPY) had net outflows of $10.3 billion, while the iShares Consumer Discretionary SPDR (XLY) saw $617 million of outflows. Like mutual fund investors, the focus for ETF holders was also beyond the shores of the U.S. as iShares MSCI EAFE (EFA) had net inflows of $796 million, its tenth best week on record, according to Lipper.

On the fixed income side, taxable bond fund investors still favor the loan participation funds group, which saw $1.7 billion in net inflows. High yield funds bore the brunt of the selling, with $1.3 billion of net outflows.

Investors are still extremely wary of municipal debt funds, which remained in the outflow mode for the 13th consecutive week, seeing a net $2.0 billion of withdrawals. Investors seem content to park their money in the meantime, with money market funds reaping inflows of $10.7 billion; fairly evenly split between institutional (+$4.6 billion) and retail (+$6.2 billion) products.

--Written by Hal M. Bundrick for MainStreet