Do As Financial Experts Do

Perhaps you have heard and seen financial experts talking about what to do now with your investments. For example, Jason Zweig, The Intelligent Investor, recently wrote that now might be a good time to take some profits and sell some stocks as the market has risen 30+% in about 3 months. Other experts talk about stocks normally go down to sideways in June any now may be a good time to sell and take some profits.

To understand what to do now, look at the money trail of what category of investments are being bought and sold. We all know that what someone does is more important than what someone says. Barron's reports money flow into mutual funds by category on a weekly basis. For the last 4 weeks an average of $3.1 Billion dollars has gone into Equity, aka Stock, funds while an average of $8.4 Billion dollars has left Money Market Funds. The rest of the money, about $5.2 Billion, has gone into different categories of bond funds.

The numbers say that investors are investing, taking lots of money from money market funds, about $35 Billion over the last month and putting it to work and that they are buying stocks. If you look at the trend over the last 4 weeks, the amount of money going into stock funds is staying stable while the amount going into bond funds are going down by a significant amount.

It is true that stocks tend to do very little in June since typically few companies report earnings in June, the last month of a quarter. With this said, it is very possible for some individual stocks to make significant moves during June. It is true that the stock market has gone up 30+% in about 3 months. This is good information for a trader who is looking to buy and sell fairly frequently instead of a long term investor. The flow of money tells a long term investors that financial experts for all of their talk are putting money from a defensive position and into the stock market.

Investing in gold has also gotten a lot of press lately and people are being encouraged to buy stock in gold mining related companies. A few months ago, I wrote that you should avoid gold for a number of reasons. Since writing this statement, gold has risen slightly while stocks in general have given far superior returns. In my view of the current economic situation, it still is not time to buy gold or shares of gold mining related companies.