Investors Will Stick With Mutual Fund, ETF Holdings In Next Downturn, Fund Trade Group Chief Asserts

ETFS

History shows investors will stick with their mutual fund and Exchange Traded Fund holdings in the next downturn, Investment Company Institute Chair Ted Truscott asserted today.

It’s a myth these investors are prone to panic when the markets go against them force and force funds to dump securities onto the market at fire-sale prices, Truscott told ICI’s annual meeting in Washington, D.C.

As evidence, he said when the tech bubble burst in 2000 and 2001, fund investors bought more stock funds.

He said another example where history supports his view there won’t be a run on funds in the next downturn is in October 1987, the month of “Black Monday,” the S&P was down 22%, but outflows from stock funds totaled 3.2% of assets.

Truscott added in the 1973 and 1974 bear market, the S&P 500 fell by 42% while stock fund investors redeemed 5.8% of those funds’ assets.

He pointed to ICI research showing more than four out of five fund investors are looking toward long-term goals—and looking beyond the daily bumps and dips in the markets.

They understand the difficulty of trying to time the market, he added.

“Fund investors also have learned the risks of chasing hot performers. This year’s MVP can quickly become next year’s strike-out,” said the ICI Chair, who also serves as Columbia Threadneedle Investments CEO.

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