Mutual Fund Flow a Market Guide

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 |  Includes: DIA, QQQ, SPY
by: Jack Miller

One of the ways to tell if you should be buying stocks or not is to look at inflows to mutual funds. In the chart below, you can see a strong pattern.

The public poured money into mutual funds at the top of the market in 2000. Last year, they withdrew funds. They were over-invested in the years after the peak and now they are under invested. Stocks will be much higher before a switch in public sentiment brings the masses back to the market at higher prices.