Ask most financial professionals and they'll tell you the same thing: Investors flee the stock market and then jump back in, but too late for their own good.
But something else may also be at work. While the Standard & Poor's 500 Index ($INX) is up almost 70% in the past 12 months, the losses caused by the market crash were the worst in at least two generations. And despite the new bull market, many investors -- indeed, many mutual funds -- are still below their pre-crash peaks.
"There's still some sensitivity to how much was lost. Investors are still opening their 401k statements and seeing losses," said Todd Rosenbluth, a mutual fund analyst at Standard & Poor's.
"I don't know if we're seeing the demise of actively managed mutual funds -- if we are seeing a big change -- but a lot of people seem to have decided to stay away from stock funds," said Tom Roseen, a senior analyst at research firm Lipper.
Money for bonds, not stocksFigures from Lipper back this view. From March 1, 2009, through Jan. 31, stock mutual funds saw net inflows of $21.22 billion -- trivial for a sector that has about $4 trillion in assets. In the same period, bond funds saw net inflows of $328 billion.
So far, so gloomy. But those numbers don't tell the whole tale. While stock mutual funds saw poor inflows in the first 11 months of the bull market, some categories fared much better than others.
International-stock funds saw $46.5 billion in net inflows -- fairly substantial flows for a category that had about $760 billion in total assets at the end of January, according to Lipper. Gold and natural-resources funds, meanwhile, saw net outflows in only one month during the period -- July -- and the $40 billion category ended the 11 months with net inflows of $4.2 billion.
The bulk of the outflow has been from U.S.-stock funds, which means that investors have been taking money out of the market even as prices have risen sharply. Though surprising, it may suggest that investors are being more careful in how they allocate cash.
As Roseen noted, while large-cap U.S. stocks are often seen as a safe harbor in a recession, the recent crisis quashed that perception. A weak dollar, higher prices for gold and natural resources, and bargain hunting may have led people into alternatives such as developed and emerging international markets.
"After the routing the international market took in 2008, I think many investors saw some unique opportunities to buy securities at deeply discounted prices. For others, it might have been simply performance chasing -- after all, Latin American funds were up 113% in 2009, and emerging-markets funds climbed 76%," Roseen said.