Fund Investors Temper Fears, Stage a Return to Stock Funds
By AARON LUCCHETTI
Staff Reporter of THE WALL STREET JOURNAL
Mutual-fund investors have been returning to stock funds this month, partially offsetting a sharp retrenchment that followed the Sept. 11 terrorist attacks, several large fund companies said.
Fidelity Investments, the nation's largest fund firm, says investors overall have put new money into its stock funds so far in October, although it didn't disclose exact numbers. Vanguard Group, the No. 2 fund firm, says about $2 billion in new money has gone into its stock funds this month, more than offsetting the $1.3 billion that left Vanguard stock portfolios in September.
The figures are "strongly positive," said Vanguard spokesman Brian Mattes. "It's a trend that started in the last week of September and has carried through." Investors were also shifting money into stock funds at T. Rowe Price Associates and Charles Schwab Corp., a large fund distributor, according to officials at those firms.
The early reports on October fund activity show investors are starting to get over some of their stock-market jitters stemming from the Sept. 11 tragedies. While Americans are still affected in many other ways, "people are more settled" about their investments than they were a month ago, according to Avi Nachmany, head of research for New York fund-research firm Strategic Insight.
Shareholders' fears, while by no means completely abated, have been tempered by the realization that most investors expect to hold stocks for long periods and that over time, stocks have still been the best investment category, despite the recent declines. Also, some financial advisers are buying stock funds again for their clients after spending most of September reassuring worried investors that they will overcome their immediate losses.
"What we've been trying to do is keep people focused on that long-term idea," says Tom Miltenberger, head of fund marketing at regional brokerage firm Edward D. Jones. Mr. Miltenberger says orders by the firm's customers to purchase mutual funds have outnumbered sell orders by three to one since Sept. 11.
Overall though, September's events led investors to pull a net $28 billion from stock funds, the largest exodus on record, according to a preliminary estimate Wednesday by Strategic Insight. That figure, if confirmed by a more definitive count at the end of this month, would eclipse the previous record monthly withdrawal from stock funds of $20.6 billion, set in March. The $28 billion in withdrawals would also be significantly higher than earlier estimates of September's defections by AMG Data Services of Arcata, Calif., and Thomas McManus, strategist for Banc of America Securities, which pegged the September figure at about $10 billion to $15 billion at the end of last month.
Even without October's nascent recovery in investor sentiment, September represented a smaller reaction in percentage than past market crises, including the 1987 stock-market crash. That October, investors pulled out about 3.1% of the assets they held in stock funds, according to the Investment Company Institute, a Washington mutual-funds trade group. By contrast, September's estimated $28 billion outflow represented 0.8% of the industry's stock-fund assets.
September's activity still represents a "spike" in movement out of stock funds, according to Mr. Nachmany. And such defections may continue in coming months. "The process of recovery is slow," he said.
In October, some bargain-hunting investors have been taking money they had temporarily parked in cash accounts and moving it into stocks at what they hope will be a bottom for prices. At T. Rowe Price, investors have been putting money into stock funds and pulling cash out of money-market funds. Brian Lewbart, a spokesman for the firm, says that the stock-fund purchases are building up at a pace to cancel out the defections from stock funds in September.
Investors have "gotten over the initial shock, and combined with the opportunities that the bottoming of the market created, it's encouraged some people to get back into the market," said Mr. Lewbart, who described the buying as broad-based into the firm's large-company and small-company funds. |
