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What's Behind That New Fund?


You said it was just anecdotal, right?


There is a whole host of anecdotal information that traders use as contrary indicators - neighbors asking for stock tips after years of not even knowing what the Dow is, and magazine covers with pictures of a snorting animal of one sort or another are the most often cited.
I always find it interesting when fund companies roll out new funds to meet customer demand. Like magazine covers, rarely is the object to anticipate a new trend – typically it's to cater to a public that is thirsting to capitalize on one that already exists.
The problem is that by the time it reaches that level, often the trend is already exhausted. On the Buzz earlier, there was a mention of mutual fund giant Vanguard's intention of rolling out a small-cap fund. I thought it would be fun to compare their timing with another fund company, Rydex, which also has a habit of timing fund launches to meet customer demand.
This is anecdotal – I have not empirically tested the tendency of fund launches to mark trend extremes. But keep an eye of some of the other roll-outs, like commodity ETFs and the sort – are these companies exhibiting foresight in capturing new markets, or are they hopping on the bandwagon to meet customer demand because they know the funds will sell immediately?

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