(February 28) – “Seven months ago, Steve Landes took $50,000 from the sale of his house and invested it in three stock mutual funds,” writes Bridget O’Brien in today’s Wall Street Journal.

“The portfolio has fallen steadily ever since, to half that. By last Friday, he had had enough. He pulled out of the stock funds and put what was left into a money-market account.”

” ‘Why hang around and lose more equity and take three to four years to make it back,’ says the 60-year-old sales manager at an underwear firm. ‘I’d rather not get aggravated every day. When it stops going down every day, I’ll go back in.’ “

“Mr. Landes is far from alone among fund investors who have decided they want a respite from stocks. New figures from the Investment Company Institute show that mutual funds continue to receive large amounts of new money from investors, but the vast majority of it lately is being allocated to money-market funds.”

“The ICI Tuesday reported that stock funds received $24.58 billion in new money in January, up from $11.64 billion in December 2000, but well below the $44.46 billion going into stock funds in January 2000. Money flowing into money-market funds in January ballooned to $102.78 billion; in December, investors put $16.41 billion into money-market funds, and in January 2000, $41.75 billion went into money funds.”

“The ICI, the fund industry’s main trade group, played down the significance of the money-market number, noting that 80% of the total was from corporations turning to money funds from other investment vehicles to chase the higher interest rates offered by the funds as the Federal Reserve started cutting interest rates.”

” ‘We wouldn’t be surprised if, when interest rates stop declining, much of this money flows back out,’ says Brian Reid, senior economist with the ICI. Of the total going into money funds, only $20.3 billion represented individual investors.”

“The inflow into stock funds is higher than one would expect, given the market’s dismal performance in recent months, although it is well below the record set in February 2000, when investors threw $55.16 billion into such funds. But bear in mind that part of the January total includes money automatically invested as part of 401(k) retirement plans and flows from balanced funds, and the total is perhaps less impressive.”