"It is worth comparing those figures with the heady days of the dotcom boom. In March 2000, net retail sales of open-ended funds were £2.8bn, while the Isa season raised a staggering £3.3bn.
So we have not quite reclaimed the heights of six years ago. In part, this is because Isas were new in 2000; there were few redemptions, while investors are nowadays cashing in some old plans. And the Investment Management Association says Isa sales were hit by the withdrawal of the dividend tax credit (one of Gordon Brown’s little tinkerings) in 2004.
A similar picture can be seen in the US. Sales of mutual funds are up but are not at 2000 levels. According to the Investment Company Institute, US equity funds had an inflow of $27bn in February; monthly sales peaked at more than $50bn in early 2000.
In short, we are not in the kind of bubble territory seen six years ago. Nevertheless, it is disappointing to see that it is much easier to persuade UK investors to buy equities now, with the FTSE 100 index above 6,000, than it was in March 2003 (net retail sales £740m, Isa season £658m) when the index was at 3,200."
Here is good evidence for the idea that retail investment in securities is mainly based on past performance, not an analysis of the fundamentals. This would point to trends developing in securities prices and over-shooting of fundamentals. It would be interesting to look at the relationship between these retail flows and something like P/E ratio.
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