The Public Is NOT in the Stock Market

Despite stocks hitting new highs, the general public is not racing back into them, writes MoneyShow's Howard R. Gold, who tells you where the majority are putting their money instead.

As stocks keep hitting new milestones, more and more pundits worry we're in another stock market bubble. They cite record margin debt, euphoria over initial public offerings like that of Twitter (TWTR), and, of course, the big run we've already seen in the major indices.

And they mention the growing involvement of Main Street investors in the stock market just as we're hitting all-time highs—a contrarian sign, if there ever was one.

The only problem is there's little evidence John and Jane Public are barreling back into stocks. In fact, the data shows, overwhelmingly, that the public remains wary of, if not hostile to, stock investing, and only a small number of affluent, adventurous individuals are doing the buying.

As of last week, investors had bought $144.6 billion of mutual and exchange traded funds (ETFs) focused on US equities and $187.1 billion in international equity funds and ETFs in 2013, according to TrimTabs Investment Research, based in Sausalito, California.

The total of $331.7 billion is the most since 2000, when investors plowed $324 billion into domestic equity mutual funds alone. And we all know what happened then. But look more closely. Of the $144.6 billion in domestic equity funds US investors have bought in 2013, only $24.4 billion went into US equity mutual funds; the rest poured into ETFs.

So, mutual fund investors contributed only 17% of the total inflows into all domestic US equity funds, so far, this year.

But a fund is a fund is a fund, right?

Not really. ETFs are not good barometers of broad individual participation in the stock market, because most aren't even owned by retail investors.

"More than one-half of all ETF assets are held by financial institutions—not individuals," John C. Bogle, founder of The Vanguard Group, wrote recently. "Financial institutions own 60% of all SPDRs, 59% of iShares, and 41% of Vanguard ETFs."

And, Bogle pointed out, a recent Vanguard study showed individuals who own ETFs "are significantly less likely to be long-term investors, and significantly more likely to be short-term speculators."

Read Howard's commentary on why investors have shunned individual stocks on MoneyShow.com.

They also represent a small sliver of the investing public.

According to the Investment Company Institute, only 3.4 million US households—3% of the total—owned ETFs in 2012, versus 53.8 million, or 44% of households, that owned mutual funds.

"ETF-owning households tended to have higher incomes, greater household financial assets, and were more likely to be headed by college-educated individuals," the ICI reported.

ETF-owning households had a median of $500,000 in financial assets, which include employer retirement plans, but not the value of a primary residence. That's eight times the $62,500 median financial assets of all US households.

NEXT PAGE: Main Street investors shun stocks

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