For every $100 invested in mutual funds and stock ETFs, only $2 came out

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Slowly and steadily, retail investors may be learning the ropes of stock market investing. More than trying to time the market, it is the time spent in the market that ultimately matters – goes an old saying. Assets under management show that retail investors have not exited the market despite the recent market drop.

As US equities decline since the start of 2022, major indexes paint a bleak picture. Retail investors, despite a lot of red in their portfolios, may just not be ready to give up and exit their investments. According to Scott Rubner, managing director of the global markets division at Goldman Sachs – For every $100 invested in equity mutual funds and exchange-traded funds over the past 74 weeks, only $2 has been spent. This is the opposite of professional investors, he says, most of whom have already exited the market. Retail trade and households are the main owners of the stock market.

But will the trend continue and will retail investors remain invested even at lower levels. Rubner said – I expect it to come out only if the market were to materially decline from current levels, and I consider that a 10% decline. One way to calculate this is to look at the average level of the S&P 500 when this investment was flowing, and then calculate a 10% drop from that average. And a 10% drop from the average in S&P equivalent terms is around 3,800. The market is significantly up from that level at around 4,088.

ETFs and funds linked to the S&P 500 and Nasdaq remain a popular choice with retail investors. “The market had a robust 74-week inflow period. That money mostly went into US commodities – S&P 500 and Nasdaq. And by buying passive ETFs, you’re buying those top five stocks – the big tech companies. is by definition the biggest and most owned place that investors have been hiding,” Rubner said.

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