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As is almost always the tendency of retail investors, they can be seen chasing top performing assets. This was clearly the case in November, according to Index Universe, which reviewed the flows in November. Money flowed to (surprise!) emerging markets and small cap stocks in November - quite late to the party since these asset classes are closing out a year strongly outperforming the broad-based stock and bond indices.

As I have mentioned before there is a strong tendency for such flows to continue at year-end and the beginning of the new year. After that it is anyone's guess but the large - and late to the party - flow of funds leaves the market vulnerable to a sharp selloff should these asset classes start to fall.

Looking at the year-to-date relative performance of the funds with the major inflows vs the S&P 500, total U.S. stock market (vti) and aggregate bond index (AGG), it's pretty clear the flows chased performance.

(Click the charts above to expand)

Here is the table with dollar inflows in millions:

VWO Vanguard Emerging Markets Vanguard 1,734.80
VO Vanguard Mid-Cap Vanguard 1,322.14
IWM iShares Russell 2000 BlackRock 1,201.37
VB Vanguard Small-Cap Vanguard 833.40
IWD iShares Russell 1000 Value BlackRock 669.54
SLV iShares Silver BlackRock 567.84
VBR Vanguard Small-Cap Value Vanguard 494.27
VBK Vanguard Small-Cap Growth Vanguard 484.19
FAS Direxion Daily Financial Bull 3x Direxion 404.85
MINT PIMCO Enhanced Short Maturity Strategy PIMCO 403.29
Source: Chasing Returns but Late to the Party?