A common belief among professional Wall Street traders is
that dumb money, better known as retail investors, will flock to the market
when stock prices are rising, then get out of the market after the stock has fallen.
This sort of trading strategy will create a lot of losses, hence the term dumb
money. During the stock market downturn in December, professional investors had
a very low level of sentiment toward the market and left the stock market. And
dumb investors poured
$22 billion into passive index funds, reaping the reward from the
recent market upturn. One possibility is that retail investors have become believers in efficient markets, resulting in
the money flowing into index funds, or at least they have been conditioned to
understand that a market downturn can mean that stocks are on sale.
