The vast majority of American investors do so through mutual funds, but that trend seems to be changing for the better because investing for the masses is getting a lot cheaper.
Data from 2016 indicated that over half of U.S. households invested in mutual funds and the industries total assets under management were $16.34 trillion at the end of the year. Over the past few years net cash inflows to mutual funds have been shrinking and even turned negative in 2015. In 2007 cash inflows to mutual funds hit an all-time high at $879 billion, which makes sense because this was the peak of the market before the crash caused by the housing crisis. In 2009, 2010, and 2011 cash inflows were negative, -$146 billion, -$282 billion and -$96 billion respectively.
In 2012 cash in-flows returned positive and hit $200 billion, but the industry has seen declining in-flow ever since; $177 billion in 2013, $104 billion in 2014, a negative $101 billion in 2015 and even worse a negative $229 billion in 2016.
It was easy to see and understand why mutual funds experienced cash flow decline in 2008, 2009, and 2010 as the market was falling and investors were scared. But the fact that less money is moving into mutual funds while the stock market in general has increased the past few year's means there is likely a larger force at play. [Read more...]