Mutual funds bloodbath
The most important lesson learnt by investors over the last two years, according to this Wall Street Journal story (subscription required), is that maybe they weren't cut out to stomach the risk of having their money invested in the stock market.
In the past year, an already limping stock market and a weak economy were further unnerved by the shock of the terrorist attacks. Then disclosure of massive corporate deception led to two huge bankruptcy filings and put many other blue-chip stocks on the ropes. U.S. stock-focused mutual funds on average have declined 19.9% in the 12 months through this week and fallen 30.3% since stocks' peak in early 2000.
So what have mutual-fund investors learned as the market turned from bad to worse? For one thing, many have found out whether they were really cut out for the risk entailed in owning stocks.
A decade-long bull market left some unprepared when gains turned into losses. Indeed, in July, investors pulled $52 billion -- a record dollar amount -- from their stock funds.