Investors Continue To Pour Money Into Taxable Bond Funds And ETFs

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Investors Continue To Pour Money Into Taxable Bond Funds And ETFs

October 19th, 2009

safe-investments “Looking at what kind of mutual funds investors are buying can be a good way to judge market sentiment, but recently their behavior seems schizophrenic. Recent reports on fund flows from Morningstar Inc. and Leuthold Group LLC show two distinct trends. In one, investors are still favoring some of the safest of safe holdings such as short-term bonds and Treasury Inflation-Protected Securities, pouring more than $100 billion into taxable bond funds and ETFs during the third quarter. One bond fund, Pimco Total Return, attracted more than $5 billion in September alone,” Ian Salisbury Reports From The WSJ.

Salisbury continues saying “But safety isn’t the whole story. While U.S. stock funds have gotten the cold shoulder, foreign stock mutual funds and ETFs, especially those that target hot but risky emerging markets, also did well, pulling in about $22 billion. Among the big winners: Vanguard Emerging Markets Stock ETF (VWO), which gained about $2.5 billion in new money. ” “Investors are going in two different directions,” says Standard & Poor’s analyst Tom Graves. “I see appetite for safety–and risk.”

“With the Dow hovering around 10000, it’s anyone’s guess which milestone–12000? 13000?–will prompt investors to rediscover U.S. stocks. Investors’ past behavior suggests it’s likely to happen at some point, although when may be clear only in retrospect. One possibility is that the move will come only after interest rates start to rise, which would erode the value of the bond funds investors seem to be counting on for safety,” Salisbury Reports.

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Here’s a look at the ETF below:

The investment (VWO) seeks to track the performance of the MSCI Emerging Markets index. The fund employs a passively managed investment approach by investing all or substantially all of assets in a representative sample of the common stocks included in the MSCI Emerging Markets index. This index includes approximately 781 common stocks of companies located in emerging markets around the world.

TOP 10 HOLDINGS (VWO) ( 15.14% OF TOTAL ASSETS)

Company	Symbol	% Assets
AMERICA MOVIL-L	(AMXL.MX)	1.5
China Construction Bank Corporation	N/A	1.34
China Life Insurance Company, Ltd.	N/A	1.23
China Mobile Ltd.	N/A	2.35
Gazprom OAO (EDR)	N/A	1.82
Industrial & Commercial Bank of China	N/A	1.11
Petroleo Brasileiro SA (Preference)	N/A	1.33
PETROBRAS -ON	(PETR3.SA)	1.17
Samsung Electronics	N/A	1.66
Teva Pharmaceutical Industries	(TEVA)	1.63