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Investors understand "buy low, sell high" but mutual fund flows show that investors don't always follow that advice.

3.27.20 Investors Often get Timing WrongIn recent weeks, headlines have been nearly universally negative, focused on the global COVID-19 pandemic, the rapid growth of cases in the United States, and the growing human health toll. In response, the combination of voluntary changes in behavior and formal steps taken by governmental authorities, educational institutions, and the business sector have also meaningfully impacted the near-term outlook for the economy and capital markets.

That leaves investors with one specific question: what should I do? Every investor has to make those decisions based on their specific liquidity needs, risk tolerance, goals, and objectives. Still, we believe that data related to fund flows and subsequent market performance tells a clear, compelling story. Investors tend to put more money into stocks after the market has performed well, while pulling money out of stocks when performance has suffered. The result? Returns in the one- and three-year periods following significant outflows out of equities tend to be very strong — much better than returns following periods of the strongest inflows.

It can be difficult to embrace risk when volatility is high; the hardest time to invest in stocks can also be the best time to do so … to be a buyer when more investors are selling.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.

Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.

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