MARKET COMMENT
Falling Market Attracts Investors

By Maynard Paton (TMFMayn)
August 28, 2002

Private investors are often seen as stock market muppets. In the current investment climate, their supposed lack of sophistication and experience suggests they'd panic and sell out should the market go into freefall. However, that popular notion is not exactly backed up by the facts.

Figures from the Investment Management Association (IMA) showed that as the stock market fell heavily during June and into July, sales of investment funds to the public actually rose. Gross retail sales increased from £2.1b for June to £2.3b in July. Watching the FTSE 100 plummet to a six-year low undoubtedly tempted many investors into the market. No sign of capitulation just yet! At the net level around £600m of new money flowed into retail funds in both June and July.

Of course, the amount of money flowing into the market over the past two years has been in decline. Although the gross retail sales performance for July 2002 was equal to the £2.3b seen in July 2001, the figure is notably lower than the £2.7b equivalent for July 2000. At the height of the tech bubble (and with the year's ISA deadline looming), March 2000 saw a record £5.3b of gross retail sales.

While the public continues to plug away with their investments then, it's sad to say that another Foolish message isn't being adhered to. The IMA stated: "Over 90% of all retail sales were made with some form of advice... As the stock market continues to be unpredictable, investors are looking for help and guidance".

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