Investors have been chasing the Dow Jones Industrial and Nasdaq Composite indexes in October, redeeming en masse on days following poor performance and pouring money into funds on days following strong performance, according to early fund flow estimates from of Santa Rosa, Calif.

Money has flowed into and out of mutual funds so rapidly that the flows have resembled the swinging of a pendulum, said Carl Wittnebert, director of research at

"You can see $10 billion going into funds one day, followed by $8 billion going out the next," said Wittnebert. "It's fairly volatile." Through Oct. 19, funds had net flows of approximately $21.1 billion for the month, Wittnebert said.

When the average mutual fund net asset value declined 2.3 percent on Oct. 17, primarily due to a 76-point, or 2.3 percent drop in the Nasdaq Composite Index that day, investors pulled a great deal of money out of their funds on Oct. 18, Wittnebert said.

"There was a $4.3 billion outflow on Wednesday, which was sizeable," Wittnebert said.

For the particularly rocky stretch of Friday, Oct. 13 through Thursday, Oct. 19, mutual funds had net redemptions of $1.4 billion, Wittnebert said.

However, since then, the stock markets seem to have stabilized following the Dow Jones Industrial Average's noteworthy drop of 204 points on Tuesday, Oct. 17 and further decline of 435 points on Wednesday, Oct. 18, Wittnebert said. Even so, projects that net flows through Oct. 19 of $21.1 billion will be offset by redemptions and that by the end of the month, net flows will be zero, Wittnebert said.

"The public has not soured on the stock market, but it is possible that they have lost their enthusiasm," Wittnebert said.

Executives from leading fund complexes and distribution firms, however, said that investors are taking a much calmer view than the data suggested. Neither call volume nor redemptions have been excessive in October, said spokespeople from Putnam Investments and Fidelity Investments, both of Boston.

Markets have declined significantly on a number of days (or in intraday periods) in October, and they have rebounded so quickly that investors did not have enough time to think about pulling their money out of their mutual funds, said Mat Keenan, a spokesperson for Putnam. The 435-point drop in the Dow Jones Industrial average early on the morning of Oct. 18 "was too quick an event to have any impact on investors," Keenan said.

"If it lasted a week or ten days, people probably would have been concerned," he said.

Fidelity fund investors also did not react impulsively to the market's sharp movements, said Jessica Catino, a spokesperson for Fidelity.

"Phone volumes were normal last week, and we saw no unusual sales activity," Catino said. Investors have continued to take a long-term view, she said.

"People seem to be very calm about the steep V's' we are seeing in the market," said Charlie Carr, executive vice president and director of national sales for Funds Distributor of Boston.

Call volume at Nationwide Financial of Columbus, Ohio did spike five percent the week of Oct. 15, said Rhodes Baker, vice president for operations at Nationwide. But that has not led to any notable redemptions, Baker said.

When the stock market first faltered in April this year, investors showed greater trepidation than they have so far in October. In April, net flows into equity mutual funds dropped 4.3 percent, or $190 billion, reducing assets under management from from $4.441 trillion in March to $4.250 trillion in April, according to the Investment Company Institute.

Investors evidently were responding to the steep decline in the markets in April, when the net asset value of the average equity fund fell 4.67 percent, according to Lipper of Summit, N.J. (MFMN 5/15/00). The Nasdaq Composite index suffered the largest decline in April - 15.57 percent, according to Lipper.

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