Mutual Fund Brokers Hurt By Lack Of ‘Cash On Hand’ During Down Economy

When stocks on the NYSE, NASDAQ and various other exchanges begin to head downward many investors put their reserves in a familiar form, cash, however many portfolio managers recently have less cash on-hand.

According to a recent report, the percentage of stock fund portfolios that have cash-on-hand is at a record low because fund assets are nearly fully invested, leaving mutual fund investors with little chance to rebound the market in recent weeks as the market continues to swing and drop repeatedly.

Because the funds are nearly fully vested some analysts say it will be hard for mutual fund managers to further invest unless they sell off some investments to buy up undervalued stocks.

According to Boston.com:

Stock mutual funds held an average 3.4 percent in cash as of June 30, the latest data available, according to the Investment Company Institute, an industry trade organization. That’s down from 3.7 percent a year earlier. But it’s the lowest percentage in ICI records dating to 1984.

To put those numbers into perspective, back in 1990 stocks had a record cash on hand level that stood at 11 percent, allowing mutual fund managers to help push stock market rebounds, an unlikely fact these days given their lack of cash on hand.

Investors have pulled huge amounts of investments from stock funds since 2008, withdrawing $266 billion, while volatility in the stock market has pushed $731 billion into bonds.

With stock funds taking in money with cash-on-hand at the start of the year, the recent downswing in the economy shows just how quickly sentiments on Wall Street can change these days and demonstrates a lack of many investors patience for the market which they could have benefited from in down times with record low stock prices had they kept cash on hand to purchase undervalued properties rather then investing fully in their mutual fund portfolios and other investments that removed cash-on hand from their investing strategies.