Mutual fund retention rates jumped to record highs over the last two years, a sign that "smart" investors have been the driving force of the recent bull market.

Boston-based Dalbar's "Quantitative Analysis of Investor Behavior" reveals that investor retention of equity funds remained at a record 4.3 years in both 2005 and 2006. The recent record is markedly higher than retention rates over the last 20 years, which mostly hovered around three years in length over that period, and as low as 1.7 years in 1987. This may be in part a result of the growth in asset-allocation funds, said Dalbar President Lou Harvey.

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