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Stock Funds Swelled in April

Christopher Sahl

Investors continued to pump money into stock funds in April as the markets rallied to new highs.

Investors added $32.2 billion, net of redemptions, into domestic equity mutual funds and mixed funds, which invest in both stocks and bonds, during the month, according to Lipper. That was up over 60% from $19.8 billion in March.

World equity funds pulled in another $17.8 billion of new money in April, nearly six times as much as the $3 billion they attracted in March. It was the first month-on-month increase since January.

But investors yanked $15.4 billion out of money market funds in April as tax bills came due. That more than reversed the $9.2 billion of inflows in March.

Investors routinely pull out of money market funds in April to pay their tax dues. Senior research analyst Tom Roseen says the strong performance of equity markets during the month could be another factor.

Still, the outflows were less than the $24.2 billion investors withdrew from money market funds in April 2006, the $33.2 billion they withdrew in April 2005 and the $45.3 billion they withdrew in April 2004.

Long-term bond funds attracted $11.1 billion of new money in April, down from $14.1 billion in March.

Among domestic equity funds, target-date and target-allocation funds were once again the most popular in April, attracting $11.9 billion of new money.

Over the last 12 months, flows into these funds have outpaced every other category, including value and multi-cap, "which have been the cat's meow as far as investment objectives over the past six years," Roseen says.

He says the simplicity of owning these funds seems to be a major draw. "Lifecycle funds seem to be satisfying those unengaged investors that we've seen, investors that were perplexed by what to do and felt paralyzed by investing but wanted something that would help them on a long-term basis."