Stocks are attracting more money than bonds are these days -- at least if mutual fund activity is any indicator. According to a Dow Jones Newswires story, nearly $2 billion per week has been pouring into stock funds recently. At the same time, bond funds were losing several hundred million dollars weekly.
What's going on? Well, this brings to my mind several thoughts.
For starters, perhaps long-term investors are simply being sensible. As Jeremy Siegel has pointed out in his book Stocks for the Long Run, over most long periods, stocks outperform bonds. Between 1802 and 2001, for example, they did so 61% of the time over one-year periods, 70.9% of the time over five-year periods, 80.1% of the time over 10-year periods, 91.7% of the time over 20-year periods, and ... (drumroll, please!) 99.4% of the time over 30-year periods. Of course, past performance is not an indicator of future results, but these powerful numbers do strongly suggest that stock funds are, over the long haul, likely to do better than bond funds.
But, sadly, many stock mutual funds underperform the market average. In fact, the majority do so. You can do better than this majority by simply opting for an index mutual fund that tracks a broad market such as the S&P 500. (Learn much more about mutual funds in general, and index funds in particular.) That way, you'll achieve market-average results. It's hard to do better than average. Bill Miller of the Legg Mason Value Trust
Still, you can do better than average, and we can help. Consider a free trial of our MotleyFoolChampion Funds newsletter, and see which funds our analyst, Shannon Zimmerman, recommends. Last time I checked, his picks were nearly doubling the market's return, with a bunch racking up double-digit gains in the past year. In fact, out of 26 picks, only three are underwater, and not by much.
Learn much more in these Zimmerman articles:
Another way to do better than the market average is to invest in some carefully chosen individual stocks. (Or ETFs -- learn more about these handy part-stock, part-fund beasts in our ETF Center.) We encourage investors to do their own research, and we've also got some recommendations -- try one of our newsletters and see what we like.
Longtime Fool contributor Selena Maranjian does not own shares in the fund mentioned above.