With stock markets collapsing amid the global economic turmoil, investors are losing faith in equities and have pulled out as much as $72 billion from stock funds in October alone.
According to the Wall Street Journal, one of the characteristics of the long market downturns in the 1930s and the 1970s has returned and rank-and-file investors (retail investors) are losing faith in stocks and have pulled out record sums from equity schemes of mutual funds.
Citing data from the Investment Company Institute, a mutual fund trade group, the Wall Street Journal report stated that investors pulled out a record $72 billion from stock funds in October alone.
However, more recent figures are not available but mutual-fund companies say withdrawals have remained heavy.
It further stated that if history was any guide, the funds are unlikely to return quickly.
The WSJ report said that individual investors arguably form the bedrock of the market, but it's difficult to exactly know about their stock holding as they own equities through mutual funds, retirement accounts and other vehicles.
Citing data from Birinyi Associates in Westport, Conn, the report added that once retirement accounts are factored in, individual investors probably account for half or more of entire stock holdings in the US.
Besides, the discomfort with stocks among investors has been growing for years, since the 2000 selloff of dotcom shares. From 2002 to 2005-end, investors put an average of $62 billion a year in US stock mutual funds, less than half the annual level of the previous decade, the WSJ report said.
Since 2006, investors have been pulling money out of US stock funds at a rate of about $40 billion a year, it added.
Meanwhile, individual investors are not the only ones who became sceptical of stocks, many buyers including private-equity firms and hedge funds also appear to be looking beyond stocks.
College endowments and hedge funds, for example, have in recent years funnelled more money into alternative channels such as real estate, commodities, art, and even farms and timberland.