Stock Funds’ Inflows Decline From January

Individual investors’ appetite for stock mutual funds has remained strong this month, but well below January’s record level, many fund companies indicated Thursday.

While the Investment Company Institute reported Thursday that January’s net cash inflow into stock funds hit a record $29.4 billion--surpassing the previous high of $28.9 billion set in January, 1996--leading fund companies said fewer dollars arrived from investors this month.

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

Janus, for example, said inflows this month totaled $947 million, down from $1.2 billion in January.

Fidelity said its domestic stock funds took in $2 billion this month, down from slightly more than that in January.

January tends to be the top purchase 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) retirement plans are established.

But Mutual Fund Trim Tabs, a newsletter in Santa Rosa, Calif., that tracks fund flows, said the falloff in purchases in February may also reflect investors’ concerns about the U.S. stock market’s heights.

The newsletter estimated that inflows this month have totaled $20 billion industry-wide, but that $1.2 billion actually flowed out of aggressive growth funds, the highest-risk stock 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.”