Investors Flock to International Stocks

Investors faced whopping losses as a result of the economic recession and the deep scars left by the financial insecurity of the past 18 months had most individuals investing in relatively safe bonds in 2009.

But “investors now appear to be easing up on the fixed income peddle," according to David Falkof, a fund analyst at Morningstar. He said although money flowing into bond funds soared to over $40 billion in August, September and October, by November inflows for taxable and municipal bond funds dropped to $33 billion.

Investors are still putting money into bond funds, but now that the stock market is regaining lost ground, the new trend may be for investors — hungry for the next big thing— to move from bond funds into emerging market stocks, skipping past domestic stocks along the way. Other international stocks, such as Japan, England and Germany, could offer big returns too, but with a lot less risk than the emerging markets.

“While investors are still risk averse, you have them trying to make up for lost ground in the last year or so jumping into international stock funds,” Falkof said.