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"As we have seen several times over the past few years, volatility can resurface suddenly and often lead to sharp market declines," says John Toohey, a vice president at mutual fund company USAA Investments, which is currently taking what it calls a cautious stance on stocks. Fund investors were rewarded with strong returns last year, and not just in the stock market. Stock fund returns averaged 15 percent, and taxable bond fund returns were 9 percent, according to Strategic Insight. As a result, stock and bond fund assets have appreciated in value by $1.5 trillion this year to nearly $9.3 trillion. Here are more details about how investors moved their money in December, and in 2012, according to Strategic Insight: STOCK FUNDS: In addition to December's $26 billion in net withdrawals from U.S. stock funds, an additional $4 billion was pulled from funds primarily investing in foreign stocks. For the full year, flows into foreign stock funds were positive, with net deposits of $23 billion. BOND FUNDS: December's net deposits of $ 11 billion came mostly from money flowing into taxable bond funds. Those funds, which primarily invest in corporate bonds, attracted a net $14 billion. A net $3 billion was withdrawn from municipal bond funds, which invest in bonds issued by state and local governments. EXCHANGE-TRADED FUNDS: Investors deposited a net $188 billion last year into ETFs, which bundle together investments in a particular market index. It was the sixth-consecutive year that ETFs have attracted more than $100 billion in new cash. In December, ETFs attracted $39 billion. Unlike mutual funds, ETFs can be traded during daily sessions just like stocks. They continue to grow much faster than mutual funds. However, assets in mutual funds are still about seven times larger than the total in ETFs, excluding money-market mutual funds.
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