As we pass the first anniversary of the
market meltdown, many investors have started to get much
more comfortable putting their money
back into stocks. But investors are more excited about
some parts of the market than others. Should you follow their
lead and invest in these hot areas, or will latecomers to the
market rally end up
disappointed?
What the hot money's buying
According to the
Wall Street Journaland fund tracking firm EPFR
Global, last week saw one of the biggest moves into stocks
all year. Money market mutual funds posted a weekly
withdrawal figure that was the second-highest in all of 2009.
Here's a short breakdown of where the money went:
Sector
Net Fund Inflows
U.S. Bond Funds
$2.8 billion
Commodity-Sector Funds
$1.1 billion
Real-Estate Funds
$925 million
Emerging-Market Bond Funds
$540 million
U.S. Stock Funds
$340 million
Emerging-Market Stock Funds
$299 million
Source: WSJ, EPFR Global.
These numbers paint a mixed picture about what's going on
in the financial markets. On one hand, the figures appear to
follow a familiar pattern, in which investors move money out
of ultra-safe investments only after prices of riskier assets
have already risen substantially.
Yet this time around, the situation doesn't look as dire
as it often does. Although investors are leaving the safety
of cash, they're putting a lot of money into fairly
conservative investments like bonds. And although that comes
with
its own problems, it suggests that not everyone is
jumping back into the stock market without reservation.
Grasping at straws
Judging from the stocks investors
arebuying, though, chasing performance is alive and
well. Here are some examples of investments in each of the
inflow-intensive categories listed above:
Â
Stock
Category
YTD Return
Freeport-McMoRan Copper &
Gold (NYSE: FCX)
Commodity
187%
Mosaic (NYSE: MOS)
Commodity
49%
Simon Property Group (NYSE: SPG)
Real Estate
40% Continued... |