Are low yields pushing money into stocks

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Near-zero interest rates aimed at pushing investors out of bonds and into stocks appeared to gain some traction as 2011 drew to a close, raising hopes that investors are ready to take on more risk.

Flows into stock-based exchange-traded funds accelerated late in the year even as the broader market meandered and money moved out of stock-based mutual funds.

That was a sign to some strategists that late-year sellers for tax purposes were moving not to the safety of bond funds or cash but rather staying in stocks. Those sellers opted for ETFs, which are more flexible than mutual funds as they can be traded like stocks, but more diversified than equities as they provide exposure to entire sectors rather than just individual companies.

“This follows a trend several industry sources have noted recently; namely, that tax-loss selling of single-stock investments as well as mutual funds tends to get recycled into exchange-traded products,” Nicholas Colas, chief market strategist at ConvergEx in New York, said in a note to clients.

Colas attributes the move in large part to low interest rates.