Mutual fund flows: The holidays are no time to take a holiday

It may just be an old wives’ tale, but many believe that investors should sell in May and watch out for volatility in October.

Adages aside, fund companies need to be aware that data shows that most mutual fund flows occur during the first quarter. According to Strategic Insight, an Asset International Company, for five of the past seven years, net mutual fund flows show that investing activity peaks each year during the first quarter.

The financial crisis of 2008 and 2009 was the likely cause for this pattern to change. Net flows spiked positively in Q2 and Q3 of 2009, outpacing any other quarter over the seven year period with record weak net inflows during Q1 both years.

Data Source: Strategic Insight, an Asset International Company

Why does the first quarter motivate investors?

• Year-end reviews by investors and their advisors to:
• assess performance and re-evaluating the funds they hold
• rebalance for appropriate diversification
• New investments from  year end bonuses 
• IRA/SEP/HSA contributions for  the prior year
• Ambitious marketing plans by fund companies start in January but phase out over time

Any other reasons? Email me.

It can be tempting to scale back your marketing during the holiday season, but knowing that active investors are right around the corner makes this a critical time to remain top-of-mind with advisors and investors. You don't want to miss the opportunity to be considered during the peak of trading.

While others are preparing for the holidays, your firm could be positioning itself to be at its most visible.

Take advantage of opportunities for positive press coverage focusing on your strategies and thoughts. This time of year, popular news publications still need to cover investment topics, even though many journalists and fund managers take off for their well-deserved vacations. If you are willing to be part of the conversations, you are more likely to get the press attention you deserve.

Make sure your Website remains up to date, particularly with year-end commentary of what you did well and your outlook for 2012. If your Website doesn't showcase your timely information as well as it could, consider an upgrade.

Send emails, make calls and connect with your shareholders, financial advisors and prospects. If you are present in any social media, be active. Also, consider an early January webinar or press event that shares your thinking on the coming year. Let your clients know you understand their needs for communication.

Of course, these strategies should be part of your overall distribution, sales and marketing plan for the upcoming year – and remember the extra opportunities that may be available for next year's holiday season.

Happy holidays!