Markets & Economy
Have mom and pop returned to the market?
December 16, 2013
Rebecca Katz: Our next question is from Alvin, also in New York. "Has the 'mom and pop' investor returned to the market given all the publicity regarding market highs? Is this a contrary indicator?" So, I know we for years have had these charts that show Vanguard mutual funds cash flow and their returns, and typically, once returns are already high, that's when the cash flow comes in. Is that what we're seeing?
Joe Davis: Yeah and in fact, I think that's … I was on vanguard.com this morning. If you go to the "Personal Investor" website, but it's on some of the other websites as well, the first banner, or one of the first banners, was on rebalancing. Or if they're not, they could probably just type in the keyword "rebalancing." Why I bring that up is one of those charts is actually from members of the Investment Strategy Group and our team, and they did some very good analysis looking at trailing returns and then cash flows. And so cash flows that I mentioned in equities, are really starting to accelerate, broadly speaking, across the industry. I think it's no surprise that part of that is very likely related to the strong performance we've seen in the equity markets.
I mean, are they returning? I think it's—I think in many ways, Vanguard is a wonderful and beautiful exception, at times, to industry trends, and that's because you know, Rebecca, more so than I that investors by and large, have actually really stayed true to their investment plan even through the depths of the financial crisis—the vast majority.
So we hear about the marginal dollar changing. You know, billions of dollars which sounds like a lot, but this is a trillion, trillion dollar financial market, and so I think that's important to keep that in mind. Many investors, I think it's fair—I personally believe it's fair to say—they're actually not making large changes to their portfolio.
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This webcast is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.
© 2013 The Vanguard Group, Inc. All rights reserved.
Be careful about chasing returns
The stock market recently hit record highs, which sometimes encourages investors to get off the sidelines and into the market game. Vanguard chief economist Joe Davis explains the importance of sticking with your target allocation, come rain or come shine.
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- All investing is subject to risk, including the possible loss of the money you invest.
- This webcast is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.