Investors withdrew a record $49 billion from equity mutual funds in July, Lipper reported. This followed $13.8 billion in equity fund outflows in June [see MFMN 7/29/02].

At the same time, bond funds set a record for largest monthly net purchases of $19.2 billion, and money market funds took in $31 billion. Between movement of assets in the three fund categories, mutual funds had total net inflows of $1.2 billion for the month.

"There was virtually indiscriminate selling across the board in equity funds," said Donald Cassidy, senior research analyst at Lipper. "Further evidence of the haste with which investors dumped their stock funds [was] the $31 billion" of net inflows into money funds, particularly "in light of very low interest rate returns."

Mutual funds of all investment classes underwent $45.8 billion in net outflows in June, setting another record for the worst month ever for mutual fund flows. Those asset losses came on the heels of $27 billion worth of outflows in May [see MFMN 6/24/02].

July’s record equity fund outflows might finally signal the market capitulation that so many traders and economists have been talking about for the past year, Cassidy said.

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