Investors added $223 billion in net new cash to stock, bond and hybrid funds in 2007, maintaining the recent robust pace of inflows to these long-term mutual funds.
Boomers and Bonds
News that Mohamed El-Erian is taking over as head of Pimco (the only major mutual fund company experiencing net inflows this year) reminded us of "Boomers and Bonds," a story we ran in our March 2006 issue. They aren't sexy (we mean bonds, boomers are very sexy) but they serve a critical role in a well-balanced and diversified portfolio. Just be sure not to go overboard in your allocations, and we once again point to a startling statistic from research firm Dalbar. Investors poured a record $309 billion into equity mutual funds at the top of the market in 2000, purchasing shares at the highest possible price, while pulling a record $50 billion from bond funds. Conversely, investors put a record $140 billion into bond funds in 2002, while pulling a record $27 billion out of equity funds at the bottom of the market, selling at the lowest possible price. In both instances, irrational behavior caused investors to do the exact opposite of what prudent investment required.
For the full story visit www.boomermarketadvisor.com.