Exchange-traded funds rather than individual stocks

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Reference no: EM131513277

TOPICS: Investments

The stock-market rally presents a difficult choice for some individual investors: Miss out or risk getting in at the top. The scars of the financial crisis have left many wary, even as the second-longest bull run in S&P 500 history has added more than $14 trillion in value to the index since it bottomed in March 2009, according to S&P Dow Jones Indices. Yet there are signs that caution is dissipating. Investors have poured money into stocks through mutual funds and exchange-traded funds in 2017, with global equity funds posting record net inflows in the week ended March 1 based on data going back to 2000, according to fund tracker EPFR Global. Inflows continued the following week, even as the rally slowed. The S&P 500 shed 0.4% in the week ended Friday.

CLASSROOM APPLICATION: The article can be used to discuss why investors have been pouring money into stock mutual funds and stock exchange-traded funds since March 2009 and more recently into bank stocks. It can also be used to discuss whether markets are overvalued.

QUESTIONS:

1. Why do you think investors have been pouring money into mutual funds and exchange-traded funds rather than individual stocks?

2. Why have they recently been buying bank stocks?

3. Is the market overvalued? Why or why not?

Reference no: EM131513277

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