Investors Don't Like Mutual Funds Anymore?

USAToday is reporting that US stock funds, once the darling of investors, aren’t drawing dollars like they used to.

Why not? One theory is that investors were burned when the S&P 500 lost 45% from 2000-02 and are stashing their money elsewhere. Another is that investors remember the mutual fund trading scandal of 2003. Still another theory says that consumers just have less to invest. Real income is down and consumer spending is up.

Which is it? We don’t know. Probably all three.

Many investors snub actively managed mutual funds [USAToday]
(Photo:FastFords)

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  1. bohemian says:

    Wait, Bush was pushing home ownership during the height of predatory lending. Wasn’t he also pushing to put social security into people running their own retirement via mutual funds?

    After seeing the gutting our 401k has taken it sounds pretty insane.

  2. mac-phisto says:

    another point to consider: it has grown exponentially easier for the average investor to create a portfolio of stocks on their own, bypassing the fees associated with a mutual fund. & giving them the freedom to buy & sell at their discretion, instead of a brokers.

    10 years ago, it was virtually impossible to trade w/o a broker. 5 years ago, online real-time trading was only profitable for those with enough money to make trading fees worth the cost. today, even a small-time investor can trade on virtually every market for a few bucks.

  3. anatak says:

    “One theory is that investors were burned when the S&P 500 lost 45% from 2000-02…”

    So we learned that mutual funds are a bad place to put money short term. Surprise, surprise. Diversify, and look long term. You’ll do fine.

  4. enm4r says:

    Or people are tired of paying ridiculous fees. Not only has stock trading become easier, as mac-phisto mentioned, but with ETFs becoming more and more popular the incentive to buy a mutual fund that covers a market/industry has been all but lost.

    There are still some great mutual funds out there, but the access we’re now given to online trading/research and new options put them lower on the list. Even for the super lazy date targeted funds are much easier (and more reassuring for the investory who doesn’t want to be bothered.)

  5. disavow says:

    A lot of people seem to be moving toward passive index funds, since fees can have a big impact on returns.

  6. MENDOZA!!!!! says:

    Buy and hold, people. The only successful day traders are already retired.

  7. swalve says:

    @bohemian: Mine has grown year over year since its inception in 2000… Maybe you’re not invested properly?