(MONEY Magazine) – August was the cruelest month. As oil prices shot from $18 to $32 a barrel, stock and bond prices plunged, handing small investors their biggest losses since the 1987 stock market crash. For the month, the MONEY Small Investor Index, which tracks the performance of the average individual's holdings, fell $1,411 to $42,163. Stocks dropped $1,339, while bonds slipped $171. Certificates of deposit and money-market funds eked out a $95 profit. The carnage on Wall Street caused individual investors to dump small-company stocks and shares of aggressive-growth equity mutual funds. At the Scudder group, for instance, investors redeemed a net $98 million from stock funds in August -- though that was still far below the $208 million they yanked out of such funds in October '87.

Much of the cash that left stock funds wound up in money funds, even though their average yield dropped from 7.84% to 7.76% during the month. MONEY estimates that at least $12 billion in fresh cash went into the funds -- the biggest inflow since last January. Most financial advisers applauded the small investor's caution. ''With a . volatile situation in the Middle East and a weakening U.S. economy,'' says Tamara Telesko, the head of financial planning for Chase Manhattan's Private Banking Group, ''we think that prudent investors should keep a high proportion of their money in safe, liquid investments.'' -- J.E.G.

CHART: NOT AVAILABLE CREDIT: Sources: Bank Rate Monitor, IBC/Donoghue's Money Fund Report, Investment Company Institute, Lipper Analytical Services, Merrill Lynch, Morgan Stanley, National Association of Real Estate Investment Trusts, Prudential Asset Management, Shearson Lehman Bros., Standard & Poor's, Robert Stanger & Co., World Gold Council and the Federal Reserve Board CAPTION: Returns for the past year -- and where the money is now The average individual investor's portfolio lost $1,411 last month and is now worth $42,163.