Investors Looking For Safety Abandon Mutual Funds

Wall Street's meltdown is taking a huge toll on U.S.-managed mutual funds. Last month, investors pulled a record $72 billion from those funds and looked for safer places to stash their cash.

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STEVE INSKEEP, host:

And we have more this morning from NPR's John McChesney.

JOHN MCCHESNEY: During the month of September, investors yanked a record $72 billion out of stock and bond mutual funds. They fled to government insured deposits as the storm clouds grew darker. Conrad Gann is the president of Trim Tabs, a California company that tracks mutual funds.

Mr. CONRAD GANN (President, Trim Tabs): At this point, we're seeing people redeem their mutual fund holdings at a near-record pace. And if that continues, October will prove to be the worst month for mutual funds on record.

MCCHESNEY: Only eight days into October, investors sucked an additional $49 billion out of mutual funds, bonds, as well as equities. The five largest diversified stock fund managers in the United States have posted an average loss of nearly 30 percent this year. They've done worse than the Standard and Poor's 500 index. Trim Tab's Conrad Gann says, when the stock market goes south, investors usually flee to bonds.

Mr. GANN: Not in this market. This is a market where investors into mutual funds, whether they're equity or bonds, they don't want the risk on either side.

MCCHESNEY: Bond funds have fallen four and a half percent this year, according to Morningstar, a company that tracks them. So where are those investors going? Into federally insured bank accounts and money market funds. Investors put nearly $50 billion into money market mutual funds in the first week of October. John McChesney, NPR News, San Francisco.

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