Stock Funds Inflows Hit $20 Billion in February

Investors poured an estimated $20 billion into stock mutual funds in February, after a record January, but they’re getting more conservative.

Investors removed an estimated $1.2 billion from aggressive growth funds in February, according to Mutual Fund Trim Tabs, a newsletter in Santa Rosa, Calif. Investors also flocked to balanced funds, which invest in both stocks, bonds and gold funds.

“It’s a super-paranoid atmosphere,” said Carl Wittnebert, managing editor of the newsletter. Investors “want equity exposure but they are scared to death.”

February’s estimates suggest investors had already come to the same conclusion as Federal Reserve Board Chairman Alan Greenspan, who said Wednesday that U.S. stock investors may be caught up in a wave of “excessive optimism.”

This month’s inflows followed a record January, when investors poured a net $29.39 billion into U.S. stock funds, surpassing January 1996’s record of $28.9 billion, the Investment Company Institute reported Thursday.

Fund groups such as Fidelity Investments, Phoenix Duff & Phelps Corp., State Street Research & Management Co., Vanguard Group, Janus Capital Corp. and Scudder, Stevens & Clark all reported strong flows in February, although not as high as January’s.

January tends to be the top sales month of the year for mutual fund groups because it’s the time when many companies match contributions employees make in retirement plans. Also, January is the month when the highest number of new 401(k) plans are established.

Cash going into growth and income funds in January jumped to $10.61 billion, from $4.05 billion in December, the ICI said. Global stock funds attracted $2.23 billion, up 142% from December, and international fund flows jumped 256% to $3.79 billion.

Bond funds were a distant second in January, with an inflow of $2.94 billion in total, compared with $2.35 billion in December of 1996 and $4.28 billion in January of last year.