Rate of Flows Into Stock Funds Picks Up

The level of fresh investments in stock mutual funds has risen this month from January’s pace, but trails 1997 inflows, data show.

Meanwhile, many investors continue to turn to bond mutual funds, apparently seeking to rebalance their portfolios in the wake of stocks’ heady gains since 1994.

The funds’ chief trade group, the Investment Company Institute, said Thursday that stock funds took in a net $14.6 billion in new cash in January, about half of last January’s record $28.9 billion and down 6% from December’s inflow.

The slowdown was expected, in large part because the plunge in Asian markets in mid-January also shook the U.S. stock market.

But as Wall Street has rebounded dramatically in recent weeks to record highs, stock fund inflows have accelerated. Trim Tabs Financial Services Inc., which tracks fund flows, estimates that a net $16.8 billion has been invested in stock funds this month.

The first six weeks of the year tend to attract the most new cash to funds, as new 401(k) retirement plans are established and many U.S. fund holders reallocate their savings for the new year.

Boston-based MFS Investment Management reported higher net inflows to its stock funds this month than January, led by increasing demand for such funds as the MFS Emerging Growth Fund.

Still, many fund investors seem relatively cautious about stocks, as the market hits new highs. Vanguard Group, the second-largest fund company, said its stock funds have attracted about $2.6 billion in new money this month, down from $2.8 billion in January.

Meanwhile, bond funds overall attracted a slew of money in January: The ICI said bond fund net inflows totaled $11.3 billion, the highest monthly inflow since August 1993. Many fund companies also report strong bond-fund buying this month.