Friday, January 21, 2011

Funds Flowing Out Of Bond Investments

Investors seem to be realizing that higher interest rates are not good for their bond investments. As we wrote in mid November in our article, Interest Rates On The Rise, higher interest rates translate into a declining value in the price of an investor's bonds. Recent mutual fund flow data shows investors have been placing less of their funds into bond mutual funds. The below chart shows the trend in the flow of funds into bond and equity funds through mid November. Bond inflows had essentially dried up.

From The Blog of HORAN Capital Advisors

The below table from the Investment Company Institute shows that bond flows have now turned negative with a majority of the outflow occurring in municipal bond funds.

From The Blog of HORAN Capital Advisors

This recent action reverses a long term trend of investors pouring investment dollars into fixed funds since 2006 and detailed by the red line in the below chart.

From The Blog of HORAN Capital Advisors


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