02/22/2012 04:50 pm ET

Stock Market Rally Barely Draws In Mutual Fund Investors

Retail investors -- average suckers like you and me who have our retirement money in 401(k)s -- often get called "dumb money" by Wall Street.

Wall Street, on the other hand, which dreamed up the collateralized debt obligation and nearly crashed the earth into the sun a few years back, is generally considered the "smart money."

Well, we individual investors may be dumb, but at least we are not reckless: The Dow's climb toward 13,000 this year has not exactly enticed people to start throwing money back into the stock market.

Investors tiptoed back into stock mutual funds last week, according to the Investment Company Institute, but are still putting most of their cash into relatively safe bond funds.

U.S. stock funds took in about $1 billion last week, according to ICI data, following an inflow of about $3.6 billion the prior week.

That earlier inflow was the biggest amount of money thrown at stock funds since February 2011. In total, investors have put more than $5 billion into stock mutual funds since the week of January 4, according to the ICI.

During that time the Dow Jones Industrial Average has jumped to nearly 13,000 from about 12,400, its highest since the spring of 2008, when the Global Financial Crisis was still in its infancy.

All along during the stock market's rally, which really began last fall, the world's biggest investors -- the world's smartest money, in other words -- including Warren Buffett, have warned investors to stay far, far away from bonds, where yields are low and prices are high.

The latest was Lee Cooperman of Omega Advisors, who told Bloomberg TV today that U.S. government bonds are "an instrument I have absolutely no interest in." He wasn't too thrilled with riskier high-yield corporate bonds, either.

Investors aren't listening to Warren Buffett or Lee Cooperman or any of the bond bashers. They put nearly $6.5 billion into "taxable" bond mutual funds last week, according to the ICI. They have put more than $34 billion into those funds, which invest in those government bonds Lee Cooperman doesn't like, since the week of January 4.

In other words, investors in the past couple of months have put seven times more money into bond funds than into stock funds, despite the stock market's steady rise and despite the smart money telling them they're being dumb.

Will we eventually be proven dumb? Will investing in high-priced bonds blow up in our faces? Or is this actually a semi-prudent thing to do after watching the smart money, assisted in recent years by stock-trading robots, repeatedly crash the market again and again over the past dozen years?