MutualFundWire.com: Bond Fund Investors Go to Money Funds

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Monday, July 1, 2013

Bond Fund Investors Go to Money Funds

Investor are flocking to safe but not necessarily profitable products after bond market tumult following Ben Bernanke's interest rate announcement, wrote MarketWatch's senior columnist Chuck Jaffe. TrimTabs research released by ICI showed the money that flowed out of bond funds did not go into stocks. From the beginning of June to June 24, only $400 million went into equity funds. The money is going into money market funds and bank products that may not deliver any substantial return, but are considered safe.

Despite the market 'tantrum" over Bernanke's statements, not much is likely to change anytime soon. Though Bernanke has said that the tapering will probably begin at the end of the year, investors should consider rebalancing all of their income-oriented investments to their planned allocations instead of letting the market volatility drive their actions, Jaffe said.

David Santschi, CEO of TrimTabs Research says there is nothing to be afraid of:

Is it scary how much the Fed is driving this market? Absolutely. But does that mean the average investor should be rushing to sell all of their bond funds? I don’t think so. If you’re careful, there is never a reason to panic, but there is really no reason to panic right now.