Although the U.S. business cycle is in its sixth year of expansion, many individual investors are still reluctant to invest in the stock market. As the chart on investor fund flows demonstrates, retail investors have pulled money out of equities during the current bull market while institutional investors have moved money into the asset class.
The fact that institutional investors have exhibited the opposite behavior of individual investors over the past seven years stems, in part, from the fact that institutions typically follow policy targets, which naturally enforce disciplined investing. Retail investors, on the other hand, too often allow their emotions to dictate their allocations, which can result in ill-timed U.S. equity investments, such as buying high and selling low.
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