Do net redemptions from stock funds occur?
As with new sales, redemptions are a normal part of the mutual fund business. Net redemptions or outflows occur when the amount of shares redeemed exceeds the amount of new purchases of shares by investors. However, net redemptions are not generally a result of a spike in shareholder redemption, but rather a decrease in new sales. During market downturns, mutual fund shareholders typically slow the rate at which they purchase new shares of mutual funds, and outflows may occur as the result of slowing in sales. The largest outflow since 1945, measured as a percentage of stock fund assets, occurred during and immediately after the 1987 stock market break, yet amounted to only 3.1 percent of total stock fund assets. In March of 2001, $15.7 billion net redemption from domestic stock funds was recorded. That amounted to 54 cents for every $100 invested in stock funds.
