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Fund Spy

These Fund Statistics Are Broken as Indicators

For mutual funds, cash

Looking for answers about where the market is headed next? Don't look at mutual fund data. It would be nice if these data could tell us whether a tidal wave of new money was going to hit Wall Street or whether jittery investors would pull their money out, but it doesn't work that way.

The most commonly cited data from mutual funds I see being used to get sense of where the market is headed are net inflows and mutual fund cash positions. Unfortunately, the first gauge is a lagging indicator and the second hardly ever changes.

Is There a Cash Hoard?
There have been some reports that money managers have built up cash and that they are waiting to invest that at lower prices. That may well be true, but it isn't in the mutual fund world. Once upon a time, mutual funds were run like they were an investor's only holding; some managers liked to try to time the market by building cash when the market was overpriced and investing it when things looked better.

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