Investors pour money into checking and savings account during 2011

Research has shown that investors have continued to pour money into checking and savings accounts during 2011, despite the fact that these accounts yield around 1% or even less than 1% in some cases. Over 900 billion has been put into savings deposits and checking accounts during 2011 alone. This is around eight times the money that has been put into exchange-traded funds as well as mutual funds. According to reports this could seriously dampen the economic recovery. Although the S&P didn’t get too far during 2011, it still managed to do much better than any average bank account, if you can include the dividends as well. It even gained by a few percentage points too. Cash may have lost its sheen with long-term investors, but the horror of going through another crash in the financial markets has literally driven away most of the investors from investing in securities and we can only hope that this does some good.

Investors had poured in around $889 billion into savings and checking accounts during the first eleven months of 2011, as per the available reports from TrimTabs Investment Research. Only around $109 billion had been put into stocks, ETFs, and bond mutual funds.

According to the observation made by TrimTabs analyst David Santschi, the investors had poured money into savings and checking accounts during July and August of 2011. This happened when Standard & Poor’s had cut the fed governments credit rating and when the markets were totally rattled due to the Eurozone debt crisis. Despite all of this there were steady inflows into savings and checking accounts and this was much more when compared to investments into stock and bond mutual funds & ETFs. This trend continued throughout 2011 and that is also inclusive of the tax season as well, stated Santschi.

Market analysts state that the cash that is available in these bank accounts also indicate that there is likely to be a greater demand for stocks and bonds in future. Santschi also added that the real money was essentially under the mattress. This money is also termed as ‘dry powder’ or ‘money on the sidelines.’ Until this money is moved into securities, the inflated bank accounts will only further dampen economic growth, warns TrimTabs. The economy may never be able to take off if investors hold on to their money without actually investing them into the markets wisely.