Rattled but Waiting

Like many individual investors, Joyce Taylor felt her stomach sink Monday as she watched the Dow Jones industrial average fall more than 150 points.

“They say you need to ride things out, but I’m scared about whether I will have anything left if I do,” said the 63-year-old Orange County secretary, who has about $100,000 of her retirement savings in stock mutual funds.

The Dow’s 157.11-point decline Monday--coming after a 140-point drop in the previous trading session--frightened investors nationwide but didn’t prompt widespread panic selling among most mutual fund investors. Like Taylor, most seemed willing to hang on for the long haul.

Indeed, individual investors have been taught to maintain a long-term orientation and not to panic when stocks decline. Some investors view declines as an opportunity to buy at lower prices rather than to sell.

“It’s a classic case of overreaction today,” said Richard Miller, a retired Seal Beach engineer. Though Miller said he thinks the market is overvalued, he doesn’t have any plans to sell the more than $300,000 he has in stock mutual funds. The Federal Reserve Board’s interest rate increase last week “has people spooked, but I’m just going to sit tight.”

But if the decline continues and conjures up fears of a broader sell-off similar to the 1987 crash, investors could lose some of their nerve.

If market declines continue this week, most major mutual funds are expecting “some impact,” said Steve Norwitz, a spokesman at Baltimore-based T. Rowe Price Associates.

Mounting investor concerns that stocks are overpriced already have major mutual funds bracing for flat net inflows into equity funds this month. Already in March, cash inflows into stock funds have been well below February’s levels, which totaled $18.5 billion industrywide, according to recent data from the Investment Company Institute, the mutual fund industry’s trade group. And February’s inflows were below January’s record $29.1 billion.

On Monday, however, many individual investors appeared to be keeping their long-term view.

Wayne Hershman, a 26-year-old grocery clerk in Long Beach, said he won’t be selling the $30,000 of investments he has in individual stocks. He vaguely remembers the 1987 stock market drop but doesn’t expect a repeat.

“I don’t see any reason to sell,” he said. “There have been drops before and there will be drops again.”

While exact data tracking how much money investors moved from equity mutual funds on Monday were not available, some of the nation’s largest funds said there was some modest selling and a spike in phone calls from nervous investors.

“People are calling--they’re looking for information and reassurance,” said Bill Benintende, spokesman for John Hancock Funds in Boston, with $25 billion in assets.

At Fidelity Investments in Boston, the leading U.S. fund group, spokeswoman Camille Lepre said some investors moved money out of stock funds Monday and into money market accounts.

“We’re seeing some modest movement,” she said. “But it was very modest.”

At Founders Asset Management Funds, nervous investors moved more money out of stock funds and into so-called balanced funds that hold a mix of stocks and bonds, said Steven Shapiro, spokesman for the Denver-based fund, which manages $5.3 billion.

Most investors who called Vanguard Group, the nation’s second-largest fund group, were more concerned about the upcoming deadline for federal tax returns, a spokesman said.

“It just seems like an ordinary Monday,” said Brian Mattes, a spokesman for Valley Forge, Pa.-based Vanguard. “You couldn’t tell anything unusual is happening in the market. It’s remarkably placid.”

Of course, some investors, less able to stomach the rise and falls, have already pulled money out of the market.

“This is like a poker game where they keep saying, ‘I’ll raise you three’ and the other guy says, ‘I’ll raise you four,’ ” said Melvin Michel, 81, a retired auditor in Glendale who pulled more than $100,000 out of the stock market in October. “I don’t have much hair left, but I keep pulling it out trying to understand what is going on.”