Individual investors are continuing to pour money into stock mutual funds at a hefty pace this month, apparently undeterred by the market’s recent choppy performance.
Vanguard Group, for example, says the approximate $1 billion net inflow into its stock funds this month is surpassing the $950-million inflow of July, and may end up making August a record month.
Fidelity Investments says its U.S. stock funds have taken $2.2 billion in this month, a healthy pace although a reduced one from the $2.9 billion that flowed in during July.
At Putnam Investments, a total of $921 million in new cash has flowed into its mutual funds overall, up 25% from July. Eight percent of the money is going into stock funds, Putnam said.
The Investment Company Institute, the funds’ chief trade group, reported Tuesday that net new cash flow into stock funds totaled $13.9 billion in July, up from $8.2 billion in June and the best month since August, 1994.
The picture also improved for bond funds, although investors’ appetite for those funds remains low. The ICI said bond funds as a group took in $42 million in new cash in July, a sharp improvement from the $3.3 billion net outflow from the funds in June.
The ICI report also showed that, as fast as investors are shoveling money into stock funds, fund managers are putting it to work in the market. The average stock fund had 7.1% of its assets in “cash” at the end of July, down slightly from 7.2% at the end of June.
Some analysts have raised concerns that the huge sums funneling into stock funds are a sign of how frothy the market has become. But others point out that for most fund companies cash inflows haven’t returned to the peak levels of late-1993 and early-1994.
Still, investors’ apparent lack of fear as the market falters worries some Wall Streeters. Aggressive-growth stock funds continue to sell well, as do other high-flying funds with heavy bets on technology stocks, fund companies say. Fidelity says its biggest seller is its tech-heavy Magellan Fund.
* INVESTOR SPOTLIGHT
A chart of monthly net new cash flows into bond and equity mutual funds. D8