The frenzy of fear stemming from the eurozone debt crisis last year was such that investors reacted worse than the previous crisis in 2008 and took their money out of the market altogether.
In Morningstar Direct’s latest Europe Asset Flows Update, December’s equity fund outflows of €11.5bn were on par with October and November’s, representing the seventh straight month of outflows from the asset class.
Fixed income funds saw outflows of €6.8bn in December, taking their yearly outflows to €43.7bn.
Dan Lefkovitz, from the European research team at Morningstar Direct, said: "In contrast to the US where investors fled equities to the perceived safety of bonds, the eurozone crisis tarred fixed income funds for European investors.
Money market funds saw the strongest inflows in December with €4.4bn, but flows to short-term funds were still negative for the year, down €5.7bn.
"This makes 2011 quite different to 2008, when market turmoil sent €155bn of investor money into the perceived safety of money market funds," Lefkovitz continued. "In 2011 investor capital left funds altogether."
But Morningstar Direct warned that its research into investor returns showed investors often cost themselves by selling near the bottom or buying after an asset class had already risen.
In addition, they often incur transaction costs and taxes that might otherwise have been avoided.
"Our analysts routinely caution against attempts to time the market and advocate a focus on maintaining a diversified portfolio structure to meet long-term investment goals," said Syl Flood, product manager of asset flows at Morningstar Direct.