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ETFs and Mutual fundsWilliam Voon

Inflows into exchange traded products tell an interesting story about investor preferences. BlackRock, which provides the popular iShares family of exchange traded funds, looked at some of the trends in 2013 – and generally they reflected the market with extraordinary accuracy.

For example, funds associated with gold saw outflows every month this year, which is consistent with the steady decline in the price of gold. Gold has fallen 26 per cent in 2013, putting it on track for its worst annual performance in more than three decades.

At the same time, flows into funds tracking developed-market indexes led investor interest: Inflows hit a record $228-billion, or about double the level seen last year. Of course, this interest coincides with the S&P 500 rising about 25 per cent, European stocks rising more than 12 per cent and Japanese stocks surging 50 per cent.

Emerging markets haven't done well in 2013, falling about 9 per cent and underperforming developed markets by about 20 percentage points – and ETFs tracking emerging market indexes tell a similar story: They suffered redemptions of nearly $10-billion.

These flows may not say much about the year ahead, but they do provide a nice snapshot of where money likes to go: It prefers winners.

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