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Net Inflows to Equity Mutual Funds January 10, 2010

Posted by shaferfinancial in Finance, Uncategorized.
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It happens consistently.  The data points out why it is so damaging.  People’s psychology does not change.  Yes, people are getting back into equity mutual funds for the last couple months.  They got out earlier in the year, at the lows, and are now getting back in 40-60% higher.

What is the propensity to sell low and buy high all about?  Basic human psychology.   Fear is a driving force in most people’s financial lives.  Instead of having a plan and sticking to it, they allow their fears to drive their decision making.  When the blood was in the street, they got scared and sold.  Now that the market has gone through a major upside correction they are fearful about being left out [they already have been!].

I have been a huge critic of mutual funds, for many reasons.  But, this is the main reason.  Most people aren’t prepared, by having a plan or emotional stability, to successfully play the buy mutual funds and hold strategy.

Fact is, most of these people would be much happier and more successful getting into an equity indexed universal life insurance policy, which doesn’t go negative, for their retirement income strategy.  The proof is in the pudding, returns [after expenses and fees] inside the top EIULs have beaten the major indexes looking back 20 years.  It is an even more dramatic difference looking back 5 to 10 years!

If your choice is a passive strategy, one you can live with, then EIUL is a better choice.  Add in the tax benefits and the choice becomes even clearer.  Human psychology isn’t likely to change.  Isn’t it time you accept the facts?

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