The mutual fund industry shrank by $1.1 trillion in October (the last month for which we have data), to $10.7 trillion. Most of that was investment losses. But $127 billion of the drop was people cashing in their funds -- double September's decline -- and that includes a decline of $72 billion in net sales of stock mutual funds, the biggest drop in the industry's history. See Investment Company Institute data here.
Will Americans -- and other investors -- keep selling? Today's Wall Street Journal says middle Americans whose belief in the rising market survived every market shock since Ronald Reagan was president are finally "losing faith" -- since this looks like one of those periods in which stocks just don't rise:
"The Dow didn't return to its 1929 high until 1954," the Journal's E.B. Browning noted. Investors made a lot of money in the 1960s, but after a market peak in 1968 investors started to sell, and from "May 1972 through March 1980, total dollars in stock funds fell 42%. Mutual-fund executives worried that the industry might not survive." The Reagan recovery and the forced shift from old-fashioned pensions to self-invested 401(k) plans buoyed the market, and investors held on even as stock prices wandered up and down with no long-term gain, from the dot.com bust in March 2000. But September's collapse finally drove large numbers of investors to cash out. Story here.