Equity funds posted modest inflows of just less than $2 billion in December, a substantial decline from the previous month when investors socked more than $10 billion into the products, according to fund researcher Lipper.

Analysts said investors were likely holding off on buying new products until January to stave off tax distributions for another year. And, likewise, they were more apt to redeem assets in funds with negative returns in order to absorb paper losses during the current tax year.

And Don Cassidy, a senior analyst at Lipper said the data show that investors are patiently waiting out the recession and turbulent markets with little panic. "Investors saw their equity fund holdings decline in value again last year, and still added modestly to stock-fund accounts," he said in a statement.

Investors also favored small- and mid-cap funds in December. Small-cap funds posted net inflows of $5.2 billion and mid-cap funds posted net inflows of $2.7 billion. In comparison, investors drained roughly $7.5 billion from large-cap funds.

Money market products, meanwhile, suffered outflows, a negative $28.4 billion, for the first December since 1998, Lipper said.

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