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Mad about mutual funds
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April 10, 1998: 8:29 a.m. ET
Giddy investors poured a record $37.5 billion into mutuals in March
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NEW YORK (CNNfn) - More than ever, that touchy-feely display of affection between investors and their mutual funds is, well, mutual.
Driven by a search for tax breaks and a bull market bursting at the seams, investors poured a record $37.5 billion into mutual funds in March, eclipsing the previous monthly record for net mutual-fund investment of $32.7 billion, set in January 1996.
That amounts to $1.7 billion a day and the third-largest monthly mutual fund intake on record, based on estimates released Thursday by the Investment Company Institute, a trade group. Investors showered mutual funds with more cash in March than in all of 1990.
Analysts attributed the surge to the rip-roaring fortunes of the Dow, which has drawn the denizens of Main Street to Wall Street in record-breaking throngs.
Mutual funds are wide-ranging portfolios that can typically include stocks, bonds, options, commodities and money-market securities.
For investors, especially novices, the appeal of mutual funds is that they offer diversification and professional management by an investment company, usually for a nominal service fee of 1 percent or less of assets per year.
The mutual fund binge has been spurred by investor contributions to individual retirement accounts, which are typically heavy during the April tax season. This year many are rushing to secure the new Roth IRAs, which allow after-tax contributions to grow tax-free, despite the fact there is no April 15 deadline for them this year. The Roth IRAs, unveiled this year, will have no effect on taxes filed for 1997.
Stock funds accounted for $27.5 billion in investment in March, up 14 percent from February's $24.2 billion, according to institute estimates. Bond funds netted $7.5 billion in new cash in March, compared with $6.3 billion the month before.
Investment in hybrid funds, offering a mix of stocks and bonds, rose month-to-month to $2.5 billion from $1.9 billion.
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