| Followers | 686 |
| Posts | 142330 |
| Boards Moderated | 35 |
| Alias Born | 03/10/2004 |
Sunday, February 05, 2017 2:12:03 PM
Amateur Investors: Weekend Analysis
* February 4, 2017
A few people have asked me about the % of Cash held by Mutual Funds and why this indicator failed to work back in 2010. Previously when the % of Mutual Fund Cash had dropped to the 4% level (points A) significant corrections followed shortly thereafter (points B to C).
However when the % of Mutual Fund Cash dropped below 4% in 2010 (point D) there was only a minor correction (points E to F), which has been followed by much higher prices. Notice the % of Cash held by Mutual Funds has remained below the 4% level for the last 6 years and has recently made another all time low at 3%.
Thus with the Federal Reserve keeping interest rates at extremely low levels for the last several years, this has likely caused Mutual Funds to remain heavily invested in stocks and out of Interest Rate driven alternatives, such as Money Market Funds and etc, which have had very poor returns.
To prove the point the chart below shows the return in Vanguard's Prime Money Market Fund since 2007. Notice this Fund has gone nowhere since 2009 and if you factor in inflation it probably has actually lost money.
http://www.amateur-investors.com/AII_Weekend_AnalysisFeb_4_17.htm
• DiscoverGold
Click on "In reply to", for Authors past commentaries
* February 4, 2017
A few people have asked me about the % of Cash held by Mutual Funds and why this indicator failed to work back in 2010. Previously when the % of Mutual Fund Cash had dropped to the 4% level (points A) significant corrections followed shortly thereafter (points B to C).
However when the % of Mutual Fund Cash dropped below 4% in 2010 (point D) there was only a minor correction (points E to F), which has been followed by much higher prices. Notice the % of Cash held by Mutual Funds has remained below the 4% level for the last 6 years and has recently made another all time low at 3%.
Thus with the Federal Reserve keeping interest rates at extremely low levels for the last several years, this has likely caused Mutual Funds to remain heavily invested in stocks and out of Interest Rate driven alternatives, such as Money Market Funds and etc, which have had very poor returns.
To prove the point the chart below shows the return in Vanguard's Prime Money Market Fund since 2007. Notice this Fund has gone nowhere since 2009 and if you factor in inflation it probably has actually lost money.
http://www.amateur-investors.com/AII_Weekend_AnalysisFeb_4_17.htm
• DiscoverGold
Click on "In reply to", for Authors past commentaries
Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Your Due Dilegence is a must!
• DiscoverGold
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
