Stock Fund Investment Accelerates in August

Stock mutual fund investors put their feet back on the accelerator pedal in August, as net cash inflows jumped sharply.

Analysts said the inflows were helped as jittery investors were calmed by a steadier U.S. stock market after July’s sell-off. But some experts say the heady days of record stock-fund inflows in the first half of this year are unlikely to return soon.

The Investment Company Institute, the fund industry’s chief group, estimated Wednesday that stock fund net inflows jumped to $19 billion in August from $5.8 billion in July.

Net inflow is gross fund purchases less redemptions, reinvested dividends and exchanges among funds in the same families. It thus measures the amount of fresh cash funds are getting.

Although $19 billion would be a huge inflow historically, it pales versus the $20-billion-plus monthly inflows that were typical earlier this year. In April alone, stock fund inflows totaled $26 billion.

“I don’t think the flows [of spring] are sustainable,” said Charles Biderman, president of Trim Tabs Financial Services in Santa Rosa, Calif. “I think you had a mania in the first half.”

Investors in August chose small-company growth, growth-and-income and international stock funds, after leaning in July toward more conservative funds, according to Lipper Analytical Services.

The sharp decline in stock fund cash inflows in July did not result from a decline in purchases but rather from a steep rise in redemptions, as some investors took profits in their funds as the stock market suffered its biggest decline since 1994.

Blue-chip stock indexes dropped about 10% in July from their May peaks, although they have since rallied almost back to their old highs.