Investors Pull $244 Billion From Mutual Funds As Market Slides: Report

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If you buy into Warren Buffett’s famous adage “Be greedy when others are afraid,” it’s time to act.

The idea of ​​investing legend is that when everyone is dumping securities like they’re going out of fashion then you should buy.

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Of course, doing so is emotionally difficult. But now may seem like an appropriate time to at least consider buying stocks and bonds that are much cheaper than they were a few months ago.

How do we know it’s a good time to do so?

So far this year, the SPDR S&P 500 (SPY .)
According to Yahoo Finance, the exchange-traded fund, which tracks the S&P 500 index, has lost about 13% of its value. The tech-heavy Nasdaq has fared worse.

Meanwhile, the yield on the 10-year US Treasury note has recently risen to 2.7% from around 1.5% at the beginning of the year, Bond prices move inversely with yields, meaning those 10-year notes are now priced much lower than they were a few weeks ago.

There has also been a significant backlash among individual investors. We know this because investors in mutual funds, who are primarily individuals, redeemed their $244 billion of stake in the four months through April, according to new data from the Investment Company Institute. They draw their investments from all long-term categories, including stock funds, bond funds and hybrid (stock and bond) funds.

That’s about a quarter of a trillion dollars, compared to an inflow of $75 billion in the same period last year.

Such a high level of sales scares me.

Could it be bad? Yes. The fear could get worse and the market could go down further. In fact, if we knew when the sales would stop, we would all be billionaires.

What we do know is that when fear is so high there is little to consider putting cash to work in the markets. Professional investors might say take a nibble – or buy a small amount of stocks and bonds at an opportune time with the idea of ​​holding them for a long time.

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