Performance Chasers`: Individual Investors...and Many of Their Advisors Too

Etf,com has reported in flows in and out of ETFs http://www.etf.com/sections/fund-flows/currency-hedged-etfs-drive-big-q1-flows?nopaging=1

The flows into ETFs over good evidence that investors are performance chasers and because of this they seldom get the returns of the asset classes they invest in...because they buy high and sell low.
This is likely the case with the currency hedged European stock ETFs.. HEDJ the fund that was top on the inflow chart below more than doubled its assets under management during the quarter. HEDJ has gained 23.6% over the past 12 months and 20.1% year to date. This means less than half the investors in HEDJ have captured all of these returns. Whatever the future outlook for HEDJ these investors have missed a good part if not most of the returns for at least the rest of the year.

And when the trend reverses,if past behavior is indicative of behavior investor in the past, they will sell out at best with only a portion of the long term returns,if not sell at a loss.

Top Gainers Q1 2015
Ticker	Fund	Issuer	Flows ($M)	AUM ($M)	Turnover
HEDJ	WisdomTree Europe Hedged Equity	WisdomTree	10,141.71	17,313.78	22,382.36
DBEF	Deutsche X-trackers MSCI EAFE Hedged Equity ETF	Deutsche Bank	5,109.65	7,235.47	8,018.95
VTI	Vanguard Total Stock Market	Vanguard	3,180.65	54,752.31	20,703.77
VOO	Vanguard S&P 500	Vanguard	2,971.29	30,637.03	22,959.84
LQD	iShares iBoxx $ Investment Grade Corporate Bond	BlackRock	2,728.93	22,417.51	19,319.74
DXJ	WisdomTree Japan Hedged Equity	WisdomTree	2,482.31	15,782.49	18,712.83
HYG	iShares iBoxx $ High Yield Corporate Bond	BlackRock	2,149.82	16,711.84	39,471.40
IEFA	iShares Core MSCI EAFE	BlackRock	2,034.02	5,418.03	4,306.25
HEFA	iShares Currency Hedged MSCI EAFE	BlackRock	1,991.48	2,123.69	2,362.75
USO	United States Oil	US Commodity Funds	1,763.62	2,792.28	39,175.59

 The market chasing of investors can be seen in the flows into international equities overall. Particularly disconcerting to individual investors is the indication that not only do individual investors follow the unwise strategy of performance chasing...if they pay an investment advisor he seems likely to be doing exactly the same thing, Quite ironic since the benefit of using an advisor should be to prevent the behavior so prevalent among individual investors...buying high and selling low.:

Allocation Shift?

International equities gathered about $42.5 billion in the first quarter, nearly half of it in currency-hedged strategies.

At the same time, U.S. equities recorded net outflows of more than $11 billion. The least-popular fund was the SPDR S&P 500 ETF (SPY | A-98), which bled almost $31 billion in assets. While SPY is a trading vehicle, and its flows are often quite exaggerated relative to the rest of the market, it nonetheless is something of a weather vane when it comes to reading investor sentiment.

Indeed, many financial advisors are moving to reallocate away from U.S. stocks following more than a decade of U.S. outperformance relative to a variety of foreign markets, not least Europe's.

Biggest Losers Q1 2015
Ticker	Fund	Issuer	Flows	AUM ($M)	Turnover
SPY	SPDR S&P 500	SSgA	-30,958.95	185,413.71	1,700,430.71
EEM	iShares MSCI Emerging Markets	BlackRock	-3,166.14	29,574.92	135,500.34
XLF	Financial Select SPDR	SSgA	-2,653.39	18,043.45	53,904.75
QQQ	PowerShares QQQ	Invesco PowerShares	-2,651.48	38,600.08	210,737.84
IVV	iShares Core S&P 500	BlackRock	-2,362.60	68,742.61	60,847.35
XLP	Consumer Staples Select SPDR	SSgA	-1,754.24	8,261.78	26,904.59
IYW	iShares U.S. Technology	BlackRock	-1,688.95	3,000.43	4,544.27
XLI	Industrial Select SPDR	SSgA	-1,389.78	7,763.81	35,897.54
ACWI	iShares MSCI ACWI	BlackRock	-1,258.27	6,311.55	7,079.25
IYF	iShares U.S. Financials	BlackRock	-1,231.98	1,255.04	3,398.67