Originally created 09/24/01

Of mutual interest

NEW YORK -- The mutual fund industry is urging shareholders not to panic over their investments in reaction to last week's terrorist attacks - and so far, it seems they're following that advice.

"Investors have showed a remarkable sense of patience and resiliency," said John Demming, a spokesman for The Vanguard Group.

Meanwhile, the fund companies, prepared for a higher level of questions about investing after the attacks, have put more staff on their phone lines and posted reassuring messages on their Web sites.

"Fidelity remains confident about the strength, stability and growth prospects of America's economy and our great public companies," said a letter on Fidelity.com from Robert L. Reynolds, vice chairman and chief operating officer of Fidelity Investments.

Some skittish investors, worried now about national security as well as the weakened economy, have redeemed shares since the stock market reopened Monday after being closed since Sept. 11, when hijacked jetliners crashed into the World Trade Center and Pentagon. Others have cited patriotism or discounted prices as reasons to do a bit of buying.

But most investors are refraining from major moves, said Rachel Robertson, a stock broker in Lexington, Ky.

"I have had a couple of people who have sold out. I haven't been able to talk them out of it. I had several others who wanted to and I had to tell them, 'You haven't lost anything yet. Until you sell, you haven't lost anything."' said Robertson, who added that she has had a few buyers.

"Most people are staying put," she said.

What Robertson is seeing is typical, said Don Cassidy of Lipper Inc., a company that researches and tracks the fund industry. Investors might not rush to sell, because the market has already fallen so sharply.

"The market had been coming down for 18 months before this. And, a lot of people psychologically lock themselves in when they have losses. That is true of funds, as well as stocks," said Cassidy, senior research analyst for Lipper. "So, a lot of people are not willing to sell."

Investor Jack Robbins said he won't redeem any of his fund shares. He believes the market is bottoming out this week as the Dow Jones industrials, which had held up relatively well as the economy slowed, tumbled below 9,000 for the first time since December 1998.

"I have a pretty positive attitude about it. I feel that the funds I am invested in are solid investments with solid companies," said Robbins, a Lexus car salesman in Austin, Texas. "It's a setback obviously, but I am not going to give up. I have more faith in the stock market than that."

But investors, including Robbins, also are in no hurry to buy amid the political uncertainty, Cassidy said.

"The shock is so huge. ... People are drawing in. In the same way that retail sales will be slow, bargain hunting by investors will be slow," he said.

Still, it's too soon to put any numbers on the money that has been flowing out of or into funds since the attacks, Cassidy said. While mutual fund shareholders could have redeemed shares last week, despite the market's four-day closure, many chose to put off major moves until trading resumed.

But there's no doubt that more cash will flow out of funds than into them during September, as has been happening for months, Cassidy said. In July, outflows topped inflows by $1 billion, and preliminary data for August shows that number to be at least $5 billion.

Demming said the number of Vanguard investors who have called the mutual fund company since the Sept. 11 attacks is less than 10 percent higher than what's normal for this time of year.

"Transaction volume was very minimal," said Demming, but he declined to disclose any numbers.

Most callers wanted to check their account balances and find out if their funds included sectors likely to be hurt the most, including airlines and insurance, Demming said.


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