BOSTON (TheStreet) -- It's going to take a lot more than yesterday's 3.4% gain in the S&P 500 Index to lure fed-up mutual fund investors back to the fold.Americans have been in full flight this year, withdrawing $84 billion from U.S. equity mutual funds through Oct. 11 versus $83 billion for all of last year, according to TrimTabs Investment Research.
Bond funds have taken in $111 billion in new assets this year after gaining $246 billion last year and $376 billion in 2009, TrimTabs said. There is also a major move by investors to exchange traded funds, which are cheaper to own and less volatile than stocks, and they offer the ability to buy and sell throughout the day, unlike mutual funds. U.S. stock ETF assets are up $22.7 billion in 2011 after gaining $32 billion last year. Unfortunately, if the current rally has legs, it will once again mean individual investors have missed out on big gains as they did in the big 2009 rally after the 2008 crash. The S&P 500 has soared 84% since March 2009. So-called "mom and pop" investors have typically been slow to respond to early signs of sustainable rallies in the past, and it's likely they'll do it again and miss out on some of the biggest gains, Mirochnik said. "Having some clarity on the whole European debt crisis is going to be a big factor" in getting the average investor back into U.S. equity funds, said Mirochnik, but it's likely to be a slow, drawn-out process. Todd Rosenbluth, a mutual fund industry analyst at S&P Capital IQ, said the S&P 500's move back into positive territory this year bodes well for a sustained rally as investors tend to react to the benchmark index's moves. That could well get the investing public creeping back into stock funds. And, he adds, stock mutual funds haven't lost their values as a good way for investors to diversify their investment portfolios. Mirochnik said "there's still a lot of cash on the sidelines, so we could have a nice little rally in the next few months and into the first part of next year."
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