Watching the flow of money

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.

Watching the flow of money

Postby djs051085 » Mon Jul 01, 2013 2:23 pm

Hi All - I frequently see news reports saying something like "X millions of dollars is flowing out of the bond market". Is there a good source for aggregated data on the flow of money into and out of equity and fixed income markets? How about specific sectors within each? Or do people just look at the market cap of the major indices?
djs051085
 
Posts: 7
Joined: 27 Jun 2013

Re: Watching the flow of money

Postby Simplegift » Mon Jul 01, 2013 3:13 pm

The Investment Company Institute (ICI) publishes weekly data on mutual fund flows found here. These are flows just between major asset classes though (domestic equity, international equity, taxable bonds, muni bonds, etc.). I'm not sure this information is "actionable" in any way for investors — but it's interesting (and baffling!) to see the trends.

Image
Source: Business Insider

PS. Welcome to the Forum!
Cordially, Todd
User avatar
Simplegift
 
Posts: 1067
Joined: 8 Feb 2011
Location: Central Oregon

Re: Watching the flow of money

Postby djs051085 » Tue Jul 02, 2013 9:52 am

Simplegift wrote:The Investment Company Institute (ICI) publishes weekly data on mutual fund flows found here. These are flows just between major asset classes though (domestic equity, international equity, taxable bonds, muni bonds, etc.). I'm not sure this information is "actionable" in any way for investors — but it's interesting (and baffling!) to see the trends.

Image
Source: Business Insider

PS. Welcome to the Forum!

Thanks simple! This looks like some great information.
djs051085
 
Posts: 7
Joined: 27 Jun 2013

Re: Watching the flow of money

Postby MN Finance » Tue Jul 02, 2013 9:56 am

Most of us don't time the market, but I clearly remember that at the market peak in Q1 2000 more money went into stock funds than at any time in history, and at the bottom in Q3 2002, for the first time ever more money went into bonds than stocks. If anything it's a reminder that the masses are usually wrong, which doesn't mean we should double down, but encourage us to stay the course.
MN Finance
 
Posts: 1100
Joined: 22 Dec 2012

Re: Watching the flow of money

Postby magneto » Tue Jul 02, 2013 10:05 am

MN Finance wrote:Most of us don't time the market, but I clearly remember that at the market peak in Q1 2000 more money went into stock funds than at any time in history, and at the bottom in Q3 2002, for the first time ever more money went into bonds than stocks. . my mind round


Sometimes wonder which is the cause and which the effect. If more money goes into stock funds then the price will rise and more people will be in at the peak, and because they are causing the peak? Can't get my mind round it.
'There is a tide in the affairs of men ...', Brutus (Market Timer)
magneto
 
Posts: 212
Joined: 19 Dec 2010

Re: Watching the flow of money

Postby Grt2bOutdoors » Tue Jul 02, 2013 10:14 am

The only flow I watch is that from my checking account into my Vanguard account - that's it. The rest is just noise.
"Luck is not a strategy" Asking Portfolio Questions
Grt2bOutdoors
 
Posts: 9114
Joined: 5 Apr 2007
Location: New York

Re: Watching the flow of money

Postby IlliniDave » Tue Jul 02, 2013 11:05 am

Simplegift wrote:The Investment Company Institute (ICI) publishes weekly data on mutual fund flows found here. These are flows just between major asset classes though (domestic equity, international equity, taxable bonds, muni bonds, etc.). I'm not sure this information is "actionable" in any way for investors — but it's interesting (and baffling!) to see the trends.

Image
Source: Business Insider

PS. Welcome to the Forum!


Would be interesting to see ETF flows added to that, as I imagine they impact the equity fund flows more than the others. It's hard to imagine net money flowing out of stocks during a bull market like that of the last 4 years.
Don't do something. Just stand there!
IlliniDave
 
Posts: 1081
Joined: 17 May 2013

Re: Watching the flow of money

Postby Simplegift » Tue Jul 02, 2013 11:28 am

IlliniDave wrote:Would be interesting to see ETF flows added to that, as I imagine they impact the equity fund flows more than the others. It's hard to imagine net money flowing out of stocks during a bull market like that of the last 4 years.

Dave, when ETFs are added to the picture (below), the trends look about the same. The net flow of funds has been steadily out of equity assets (except foreign equity) ever since the 2008-2009 financial crisis. Investors' decisions, in aggregate, are a bit hard to fathom at times!

Image
Source: The Big Picture
Cordially, Todd
User avatar
Simplegift
 
Posts: 1067
Joined: 8 Feb 2011
Location: Central Oregon

Re: Watching the flow of money

Postby Calm Man » Tue Jul 02, 2013 12:32 pm

I think this type of graph reflects the potential misuse or misunderstanding of data. The MUTUAL FUND flows might be one way or another. But the TOTAL flows are zero. For every buyer there is a seller. From what I have observed, whenever the mutual funds zig, a few months later the market has already gone the other way. That is the current bond fund sellers have reacted to all of the news and who the heck do you think is buying the bonds from them? Probably in part those who sold it to the fund holders when they were buying.
Calm Man
 
Posts: 2124
Joined: 19 Sep 2012

Re: Watching the flow of money

Postby IlliniDave » Tue Jul 02, 2013 12:57 pm

Simplegift wrote:
IlliniDave wrote:Would be interesting to see ETF flows added to that, as I imagine they impact the equity fund flows more than the others. It's hard to imagine net money flowing out of stocks during a bull market like that of the last 4 years.

Dave, when ETFs are added to the picture (below), the trends look about the same. The net flow of funds has been steadily out of equity assets (except foreign equity) ever since the 2008-2009 financial crisis. Investors' decisions, in aggregate, are a bit hard to fathom at times!

Image
Source: The Big Picture


Thanks, that's interesting, and somewhat counter to my intuition. I see where a lot of personal equity investment flowed to international at least up until the last couple years but even that's faded of late. I guess the institutions are loading up while individuals buy bonds and gold ( :happy )?

Maybe people are now so crash-averse that as soon as the market puts together a couple of back-to-back good years they head for the hills in terror.

I always feel like I'm doing something right when I'm going against the grain :wink:
Don't do something. Just stand there!
IlliniDave
 
Posts: 1081
Joined: 17 May 2013

Re: Watching the flow of money

Postby djs051085 » Fri Jul 05, 2013 4:23 pm

MN Finance wrote:Most of us don't time the market, but I clearly remember that at the market peak in Q1 2000 more money went into stock funds than at any time in history, and at the bottom in Q3 2002, for the first time ever more money went into bonds than stocks. If anything it's a reminder that the masses are usually wrong, which doesn't mean we should double down, but encourage us to stay the course.


Good post MNF. Just FYI, I was not interested in this data to "time the market", necessarily. Just interested in a good source for the data. And if by staying the course you mean making mutual fund contributions, then it is those fund managers who are deciding where to invest and so "market timing" does occur to some extent in those investments (though I agree the average investor gets it wrong more often than not).

Calm Man wrote: I think this type of graph reflects the potential misuse or misunderstanding of data. The MUTUAL FUND flows might be one way or another. But the TOTAL flows are zero. For every buyer there is a seller.
This doesn't necessarily tell the entire store. For a close-end fund, shares are traded between investors. Open-ended mutual fund redemptions, however, are settled by the fund at the end of each trade day. And ETF shares can be created and destroyed as needed because they are technically a basket of underlying securities traded "in-kind". So total flows can definitely be non-zero.
djs051085
 
Posts: 7
Joined: 27 Jun 2013

Re: Watching the flow of money

Postby mrwalken » Fri Jul 05, 2013 6:00 pm

Simplegift wrote:Image



So basically in the aggregate, investors managed to miss the run-up in US stocks while pumping up their bond holdings in order to get hammered by the recent bond downturn?
mrwalken
 
Posts: 65
Joined: 8 Oct 2011

Re: Watching the flow of money

Postby IlliniDave » Fri Jul 05, 2013 7:39 pm

mrwalken wrote:
Simplegift wrote:Image



So basically in the aggregate, investors managed to miss the run-up in US stocks while pumping up their bond holdings in order to get hammered by the recent bond downturn?


That seems to about sum it up. Hopefully the bond hammering will be moderate. Several of my colleagues basically want nothing to do with stock markets after the 2000s. It seems they are more representative than I thought.
Don't do something. Just stand there!
IlliniDave
 
Posts: 1081
Joined: 17 May 2013

Re: Watching the flow of money

Postby Ranger » Fri Jul 05, 2013 8:35 pm

I do not think fund flow data is not very accurate, because they do not consider derivative markets.
Take the following scenario:
Investor sells 1000 SPY shares and buys 1 deep in the money SPX call. Flowing money out was counted in fund flows, since SPX is cash index derivative and won’t be counted in the flow data.

Another scenario:
Fund sells 1000 SPY shares and buys 2 mini ES future contract or buys at-the-money 4 ES future options. These are perfectly hedged positions but flow data is different.

How about big mutual fund trades with another fund in “dark pool”? Are these data reported?

Those flow data may be accurate in the eighties, but i don't think it will give complete picture.
User avatar
Ranger
 
Posts: 446
Joined: 20 Feb 2007
Location: Wolverine Nation


Return to Investing - Theory, News & General

Who is online

Users browsing this forum: castlemodesto, FinancialDave, heyyou, LowER, mpt follower, Yahoo [Bot] and 57 guests