January Saw ‘Modest’ Stock Fund Gains

Investors in U.S. stock mutual funds added modestly to their portfolios during the latest month, reversing seven straight months of net redemptions, according to Strategic Insight data.

A Strategic Insight news release said stock fund positive flows reached $7 billion in January and were supported by seasonal deposits. Inflows were experienced in both U.S. stock funds ($5 billion) as well as in international equity funds ($2 billion).

During January, mutual fund investors net purchased $21 billion of taxable bond funds—with all key sectors showing gains—and more than $3 billion of tax-free bond funds, the news release said. Money market mutual funds benefited from more than $64 billion of net inflows, as assets rose to another record nearing $4 trillion, the company said.

The January data suggest a slowing of defensive switching among stock fund investors, and imply that sizeable net redemptions are unlikely to recur, said Avi Nachmany, Strategic Insight director of research, in the release. “With more than two-thirds of stock fund assets held for retirement savings, the eventual recovery of stock prices will benefit most buy-and-hold investors,’ he added.

In addition, ETF bond funds garnered over $5 billion of net inflows in January, while ETF equity funds experienced modest net redemptions.