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		Home Page News You Can Use Stock funds swell by $60 billion Scandals fail to deter investors from record inflows in January By Beth Healy, Globe Staff, 2/19/2004 Investors poured money into stock funds at the record clip of $60 billion in January, outpacing the previous monthly high notched nearly four years ago, at the peak of the bull market. Emboldened by last year's double-digit returns, investors appear to have shrugged off concerns about the fund industry's market-timing scandals as they entered 2004. According to estimates released yesterday by Strategic Insight, a New York fund-tracking firm, investors last month surpassed the $56 billion they moved into stock funds and balanced funds in February 2000, just before the market crashed. "The market's up," said Avi Nachmany, the director of research at Strategic Insight. "People have decided to bring back some of the money they had defensively moved away before." January is traditionally a strong month for mutual funds, because investors tend to hold their money back at the end of each year. But even discounting the January effect, Nachmany said, last month was huge. Despite a heap of revelations over the past six months about improper trading and sales tactics at a long list of fund groups, and ongoing investigations by regulators, there's a sense in the industry that "it's safe to come back," Nachmany suggested. By his calculation, total assets in all categories of mutual funds will have broken through the $8 trillion mark this month, for the first time ever. The fund firms that saw the fewest negative headlines are reaping the lion's share of the new assets flowing into stock funds. Fidelity Investments said its equity funds took in $7 billion in fresh cash in January -- the highest amount in a decade. In January 1994, the firm's stock funds logged $7.5 billion in inflows. Fidelity, Vanguard Group, American Funds, and PIMCO Funds gained more new assets than other fund families last year. "They've definitely benefited from the fallout of the scandal," said James Lowell, editor of Fidelity Investor, an independent investment newsletter in Needham. Many investment firms have launched heavy marketing campaigns over the past few months to woo customers back, writing letters and running advertisements to convince them the troubles were confined to a few bad actors. Still, Lowell said, it's surprising how easily investors seem to have forgiven the misdeeds. "For the first time, the mutual fund industry as a whole has been hit with a scandal," Lowell said, "yet the individual investors are voting with their dollars in a way that shows they could care less." The bigger concern, Lowell said, is the notion that investors are chasing last year's returns. For many people, it's still sinking in that the market finally turned around in 2003 after a three-year decline. The Standard & Poor's 500 index climbed 26.4 percent last year, while the Nasdaq Composite index shot up 50 percent. And while the indexes are still far from their 2000 highs, they aren't likely to recoup that lost ground in a steady fashion. "It's a testament to human nature," Lowell said, that investors are overreacting to the market's latest moves. But trying to time the market, or leap in because it appears to be on the rise, he said, "That's a fool's game."   Back to Original Article: News You Can Use
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