Thursday, November 8, 2001

Investors rushed to get out of the tumbling stock market after the September 11 terrorist attacks and poured their money into more conservative investments like bonds and money market funds.
But investors are increasingly returning to their old habits as the stock market rebounds slightly.
“There was a flight to safety in September, but we’re starting to see the reverse here over the past five weeks,” said Steve Norwitz, spokesman for T. Rowe Price, a Baltimore investment advisory firm that had $140.4 billion under management as of Sept. 30. “But what we saw in September was definitely an aversion for equity investing and mainly interest in money markets.”
Before the attacks, the stock market was almost a year and a half into a downturn. When the markets reopened almost a week after the attacks, a massive sell-off left the market at its lowest point for the year.
But business is picking up, investment groups say.
Individuals who cashed out on their investments are coming back to put their money into company stocks and mutual funds. But mostly, more investors are pouring capital into safer ventures, such as bonds and money-market funds, which invest in certificates of deposit, government-backed securities and other traditionally safe ventures.
“We’ve seen a general trend of investors utilizing our money market mutual funds and our bond mutual funds more so than they have in the past,” said Ed Monaco, vice president and local branch manager with Fidelity Investments, which had $813.1 billion under management as of yesterday. “It’s certainly fair to say some of it might have gone into equities before.”
American Century Investments, a Kansas City, Mo., advisory firm with $86.6 billion under management as of Tuesday, also saw some of its clients move their money out of growth funds and into more conservative equity and bond funds, said spokeswoman Laura Kouri. Other clients closed their accounts altogether. But investment redemption was actually lower than this time last year, Ms. Kouri said.
The Dow Jones Industrial Average has slipped 11 percent this year, while the Nasdaq Composite Index has fallen nearly 26 percent. Both markets have rebounded since September 11, but have not reached the levels they were at before the terrorist attacks.
Clients of T. Rowe Price were skittish, too, cashing out close to 1 percent of investments in equity funds in September. By comparison, investors took out 3.5 percent during the 1987 market crash.
“People are buying equity, growth stocks, value funds, large cap, small cap, and continue to buy bonds,” Mr. Norwitz said. “And just recently, over the last week or so, there’s also more interest even in the international market.”
Investments in 401(k) and other retirement plans also continued at their usual pace.
Stocks may not be popular with the average investor, but experienced market players are buying them more than ever, said Jeff Kosnett, investment specialist with Kiplinger’s, a personal finance publication. He added that such growth stocks once cost hundreds of dollars but are now inexpensive and could turn into blockbuster investments when the economy recovers.
“Going back to last year, people started seeing their [investment] balances go down,” Mr. Kosnett said. “They didn’t necessarily want to get out of the market entirely, but they did try to diversify.”
He also said bonds were popular even before the terrorist attacks, since they are safe and profitable investments while interest rates fall. The Federal Reserve has cut rates 10 times this year. But bonds have rallied as much as they can and once the economy begins to recover interest rates will rise, lessening the appeal of bonds, Mr. Kosnett said.
“Bonds now are expensive,” he said. “While individual investors might be a bit battle-scarred, the pros and the experienced investors as of late September are investing in the stock market big time, and haven’t really stopped. That’s why the market has been as strong as it has in the last few weeks.”

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