Newspaper article THE JOURNAL RECORD

Shaken, Not Stirred

Newspaper article THE JOURNAL RECORD

Shaken, Not Stirred

Article excerpt

NEW YORK -- It would be stretching things to say that mutual fund investors were the heroes of last week's historic stock market selloff.

But if panic had set in at kitchen tables inside the nearly 50 million U.S. homes that own mutual funds, the market hiccup might have turned into pneumonia.

Instead, clearer heads prevailed.

"Mutual fund investors behaved like seasoned, long-term investors, taking advantage of a market opportunity rather than heading for the doors," said Edward Rosenbaum, director of research at Lipper, a New York company that tracks mutual fund performance.

Hard data won't be available for weeks, but it appears many mutual fund owners stepped in as buyers while the market was tanking last Friday.

That fortitude is being credited with helping to avert the potential disaster that would have resulted had they chosen instead to sell.

And circumstantial evidence based on trading patterns and the total volume of trades on Friday -- the day the Dow Jones Industrial Average fell 617.78 points and the Nasdaq Composite index dropped 355.49 -- indicate most fund investors resisted the temptation to sell and simply rode out the downturn.

"The trading volumes don't support the contention that there were mass mutual fund redemptions," Rosenbaum said.

Had managers at the huge U.S. fund companies been deluged with calls from investors seeking to redeem shares, trading volume on the New York Stock Exchange and Nasdaq stock market would have been much higher than it was. That's because fund managers would have needed to sell stock in order to pay investors who chose to get out of the market.

In fact, while volume on both exchanges was high that day, neither the NYSE or the Nasdaq set a record for the number of shares that changed hands.

"That suggests that large panic selling didn't happen," Rosenbaum noted.

Performance figures from April 14 were predictable, reflecting investors' sudden distaste for technology companies, especially those with little or no history of turning a profit.

In any case, all categories of stock funds fell an average of just under 5 percent, well below the 9. …

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