Small Investors often flee the stock market at the bottom and then jump back in at market tops..

The evidence of the past year fits the pattern: New money coming to stock mutual funds has been negligible.

They have reasons to be cautious, of course, while the market is up almost 70% in the past 12 months, many mutual funds are still below their pre-crisis peak as well as the overall market...

"There's still some sensitivity to how much was lost [in the bear market] – investors are still opening their 401(k) statements and seeing losses," said Todd Rosenbluth, mutual-fund analyst at Standard & Poor's.

The question is whether the losses were so big that they scared investors away from stocks not just for the next few months, but also for years.

"I don't know if we're seeing the demise of actively managed mutual funds – if we are seeing a big change – but a lot of people seem to have decided to stay away from stock funds," said Tom Roseen, senior analyst at research firm Lipper Inc.

From March 1, 2009, through Jan. 31, stock mutual funds saw net inflows of $21.22 billion – trivial for a sector that has about $4 trillion in assets. In the same period, bond funds saw net inflows of $328 billion. – Wall Street Journal

After the Great Depression, the American stock market was decimated.

In the latter 1940s, the New York Stock Exchange, in desperation, came up with the idea of road shows to explain to American investors the benefits of investing in stocks.

The publicity campaign worked over a period of time.

Eventually, the US stock market took off and really hit its stride in the 1960s, culminating in a perception that a list of nifty fifty corporations offered a "can't miss" opportunity, over a long period of time, to guarantee (hopefully) the eternal solvency of one's family.

Nifty Fifty was an informal term used to refer to 50 popular large cap stocks on the New York Stock Exchange in the 1960s ... as they were viewed as extremely stable, even over long periods of time. [They] were assigned extraordinary high price-earnings ratios. Fifty times earnings was not uncommon. – Wikipedia

Of course, perceptions of the nifty fifty began to change after a 1969 stock market collapse, which helped create the chaotic 1970s.

The 1980s were kinder to equity; a lengthy stock market rally was signaled by the infamous Business Week cover proclaiming the equity market dead.

Stocks immediately began to rise on this analysis and continued to do so until 1987 when the market crashed again, partially as a result of certain Western and American monetary policies.

The stock market limped along until the late 1990s when it became clear to Americans especially that if only they bought "tech stocks" the solvency of one's family could (hopefully) be guaranteed.

This perception was once again dashed with the tech bust in 2000 and subsequent recession.

In the later 2000s it became clear to certain people that they could guarantee the solvency of themselves and their families (hopefully) by buying real estate in desirable places like Florida and "flipping it" because all the baby-boomers in America were going to retire to Florida, which meant that real-estate prices in Florida, as well as Nevada and California, were never going to come down.

Similar sentiments were voiced in the Arab Emirates where leaders received the epiphanic insight that Dubai was the Paris of the Middle East and real estate prices would never come down because hordes of European and Russian expats wanted to live on “Palm Island” – eternally.

The point is that there may have been too many false hopes and misinformation in the past.

Loaded down with big fees and taxes along with huge losses in the typical mutual fund was too much for the average pre-retired or retired person to tolerate.

As the bulk of Americans become older, their financial prospects, due to the horrendous performance in their 401(K) accounts and other retirement funds, are not good, and they are properly angry about it.

It is a disgrace that investment advisors are not more educated and worldly about a client’s welfare in their investment selection. They just seem to follow the old obsolete text book models that no longer work in this economy.

What could they have recommended to their clients that would have made more sense?

Over the past 10 years gold has appreciated over 300% While the S&P 500 index (the key index the typical mutual fund manager tries to equal) lost -6.9%.

Most advisors did not recommend gold to their clients…

They continued to ignore gold and kept on recommend losing mutual funds and variable annuities.

Gold bullion is very simple to understand…

No high paid CEO’s to cook the books… No conflicts of interest due to huge investment banking fees paid to brokerage firms.

No kick backs to brokers to push certain mutual funds over others…

Bob Tonachio, CEO of Robert James & Associates, Inc. may be contacted at 1-800-530-5700.

His firm charges no fees for advice and consultations are always confidential and free of charge. www.robertjames.us is an educational website with the ability to view live lowest cost, spot market gold and silver trading in London, New York and Zurich 24 hours per day.

Free, pure gold bullion is offered to all who register on the website.