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Cash Into Stock Funds Slows in December

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Cash flows into the nation’s stock mutual funds slowed down in December, according to data released by the Investment Company Institute (ICI). U.S. stock funds took in $10.10 billion in net new cash for the month, versus an inflow of $21.02 billion in November.

For the year as whole, stock funds received $135.80 billion in net new cash in 2005, well below the $177.85 billion recorded last year.

U.S. investors have become enamored with foreign stock markets. World equity funds — U.S. funds that invest primarily overseas — posted an inflow of $12.28 billion in December, versus an inflow of $11.79 billion in November. Funds that invest primarily in the U.S. had an outflow of $2.18 billion in December, compared with an inflow of $9.23 billion in November. For the year, world equity funds had an inflow of $104.61 billion, versus an inflow of $31.19 billion for domestic equity funds.

Long-term funds — stock, bond, and hybrid funds — had a net inflow of $6.69 billion in December, compared with net inflow of $21.21 billion in November. For 2005, long-term funds had an inflow of $192.48 billion, versus an inflow of $209.80 billion in 2004.

In a climate of rising interest rates, investors continue to shun bond funds. Fixed-income portfolios had an outflow of $2.71 billion in December, versus an outflow of $324 million in November. Taxable bond funds had an outflow of $1.51 billion in December, compared with an inflow of $406 million in November. Municipal bond funds had an outflow of $1.21 billion in December, compared with an outflow of $730 million in November.

For the year, bond funds had an inflow of $31.42 billion, versus an outflow of $10.77 billion in 2004.

Money market funds had an inflow of $46.56 billion in December, compared with an inflow of $30.29 billion in November. Funds offered primarily to institutions had an inflow of $40.13 billion. Funds offered primarily to individuals had an inflow of $6.43 billion.

Overall, the combined assets of the nation’s mutual funds increased by $138.9 billion, or 1.6%, to $8.906 trillion in December.

NET NEW CASH FLOW OF LONG-TERM FUNDS (BIL.$)

December 2005

November 2005*

2005

2004*

Stock Mutual Funds 10.10 21.02 135.80 177.85
Taxable Bond Mutual Funds -1.51 0.41 26.37 2.92
Municipal Bond Mutual Funds -1.21 -0.73 5.04 -13.69
Hybrid Mutual Funds -0.70 0.51 25.26 42.71

*Revised

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