Cash Continues to Pour Into Stock Funds
For the second straight month, individual investors pumped money into U.S. stock funds at an unrelenting rate, helping fuel the rise in the Dow Jones industrial average to near the 6,000 mark.
An estimated $16 billion was invested in equity funds in September, according to the Investment Company Institute, an industry trade group.
Fund companies said the pace of new buying so far in October remains at equally high levels.
“Cash continues to pour into stock funds at a record pace,” said Amy Arnott, a senior analyst at Morningstar Inc. in Chicago.
The ICI’s report on September inflows follows its August report that said a net $17.93 billion was invested in stock funds. The monthly record was set in January, when $28.9 billion was invested in stock funds, the ICI said.
Companies such as Vanguard Group, Charles Schwab Corp. and T. Rowe Price Associates Inc. said stock fund net inflows were higher in September than in August.
The ICI estimated that in the first nine months of 1996, a record $177.8 billion was invested in all types of stock funds, surpassing the previous full-year high of $129.6 billion in 1993.
The high levels of fund purchases in August and September indicate that investors are sensitive to swings in the financial markets. In July, the stock market suffered one of its worst slumps since 1990 and stock fund purchases fell. As the market recovered in August, so did the level of fund buying, and that trend carried into September and early October.
“Fund inflows are definitely giving the stock market a boost,” said Laszlo Birinyi, president of Birinyi Associates Inc., a Greenwich, Conn.-based equity research firm.
The Dow industrials are up almost 11% since July 23, when the benchmark stock average closed at its lowest level in six months.
Though investors are pouring money into stock funds, they’re less enthusiastic about bond funds. An estimated $1.5 billion was added to bond funds in September, compared with net inflow of $1.6 billion in August, the ICI said.
