Investing in stocks these days feels like walking blindfolded in a knife factory, but at least that has led fund investors to tread a bit more carefully.

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Without a Net: The Perilous State of Net Funds

Investors are traditionally fickle, typically buying shares of growth or value funds, favoring whichever style had worked best in recent months. In the first six months of 1999, for instance, four of the top-five-selling fund categories were tech, large-, mid- and small-cap growth funds that rode the mercurial

Nasdaq Composite

to heady gains. But this year it hasn't been as easy to identify which style has the wind at its back, and the latest fund sales data shows that fund investors are spreading their bets.

For now, diversification -- the sleepy and all-weather strategy of blending differing stock and bond investments in your portfolio -- is in vogue, according to the latest fund-flow figures. But many fund investors would be well-served to keep their current tack no matter where the markets go from here.

In April, when battered tech and tech-stuffed growth funds gained ground on their tech-light value peers, fund investors' favorite funds were big-cap value ($4.9 billion), big-cap growth ($2.8 billion) and big-cap blend funds ($2.5 billion), which combine the growth and value styles. They also pumped billions into foreign stock funds, further diversifying their portfolios, according to figures released late Friday from Boston fund consultancy

Financial Research Corporation

.

Intermediate-term bond funds finished just out of the top-five selling categories with April inflows that outpaced redemptions by more than $1.8 billion. In March this pack, led by

(PTTAX) - Get Report

Pimco Total Return fund, was the first bond-fund category to top monthly sales charts since August 1998.

A look at this year's top-selling funds through the end of April shows an uncharacteristically diverse roster. Pimco Total Return lords over all others with a whopping $4.1 billion net inflows, and

(VBMFX) - Get Report

Vanguard Total Bond Market Index fund is also in the mix with a $1.8 billion net inflow. Back in June of 1999 when investors were in the throes of tech fever, there weren't any bond funds on FRC's top-20 sellers list.

Given that the average big-cap value fund is up 2.3% so far this year, compared with a 2.8% loss for the

S&P 500

, it's not surprising to find value funds like

(NYVTX) - Get Report

Davis New York Venture fund ($2 billion) and the

(CABDX) - Get Report

Alliance Growth & Income fund ($1.4 billion) among the top sellers for 2001. But on the heels of the

Nasdaq's

15% gain in April, the list of investor' faves this year also includes growth funds like the

(AGTHX) - Get Report

Growth Fund of America ($2.1 billion),

(MIGFX) - Get Report

MFS Massachusetts Investors Growth fund ($1.4 billion), and

(ACEGX)

Van Kampen Emerging Growth fund ($1.2 billion) among this year's top sellers.

As usual, if there's any theme among the list of favorite funds, it's market-beating returns. Eight of the 10 top sellers are leading the S&P 500 so far this year, according to

Morningstar

. The $2 billion that's flowed into Vanguard's

(VTSMX) - Get Report

Total Stock Market Index fund, which tracks the broad

Wilshire 5000 Index

, shows that investors aren't averse to merely chugging along with an index as opposed to betting on funds focused on one sector or style.

It's interesting to note how quick fund investors were to wrap their arms around tech-heavy funds that raked in record amounts of cash over the past year and burned investors in the Nasdaq's free fall. The fourth best-selling fund in April was the

(PRSCX) - Get Report

T. Rowe Price Science & Technology fund with a $652 million net inflow. The fund, which gained 30.4% in April, is still down more than 30% over the past 12 months, according to Morningstar.

Tech funds were the 10th best-selling category in April with a $1 billion positive net inflow, but they're down more than 35%, on average, over the past year. The S&P 500 is down 6.4% over the same period, according to Morningstar.

Despite investors' renewed love for techie fare, a look at this year's flows compared with the same period last year shows a tectonic shift in investor psychology. Through the first four months of 2000, domestic stock funds took in some $95 billion, compared with $34.8 billion over the same stretch this year. At the same time, bond funds of all flavors are seeing positive net inflows this year after remaining in the red last year.

If fund investors are more inclined to put money in bonds than in stocks, they're not alone. Stock fund managers carried just a 4% cash stake at the end of last year's first quarter, according to the

Investment Company Institute

, the fund industry's largest trade group. That figure rose to 5.8% at the end of March this year.

Ian McDonald writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

imcdonald@thestreet.com, but he cannot give specific financial advice.