Although index-funds have long been touted as the fund choice of the buy and hold investor, the net outflow of assets in the Vanguard 500 fund is evidence of an underlying fickleness on the part of index investors, said Daniel P. Weiner, editor of the Independent Adviser for Vanguard Investors.

"I think there is absolutely no question that index fund investors chase performance as much as any other investors," he said. "And when performance lags, interest lags, and eyes begin to wander and dollars begin to wander."

The strong growth of index funds in the past few years can be attributed to strong market performance, said Kurt Brower, a mutual fund consultant with Brouwer & Janachowski of Tiburon, Calif.

"The relative performance advantage of a passively-managed fund has been there for many years but obviously this year it has not been and investors are starting to go into actively-managed funds," he said.

Last month marked just the second time this year that the Vanguard 500 Index Fund had net redemptions, Weiner said. The fund had a net outflow of $100 million following March's larger outflow of $700 million. March's outflows was the result of investors chasing managed technology funds, Weiner said.

August's outflows are more unsettling because it shows investors are beginning to grow weary of the continued lack of performance of the S&P 500 and other indexes, he said.

"It's no big secret that all of those people that were smitten by indexing were smitten because the S&P 500 was doing well," he said.

Year-to-date inflows are down sharply from what they were last year, Weiner said.

Another Vanguard fund that suffered outflows last month was the Vanguard Total Market Index Fund. It had $90 million in outflows in August, the first time the fund had net outflows in its history, Weiner said.

If the markets that the funds track continue to do poorly, Vanguard index funds can expect continued outflows next month, Weiner said.

"I think the trend that continues is the one that says investors chase performance," he said.

Not all of Vanguard's funds suffered outflows, however. The firm's Mid Capitalization Index Fund and the Small Cap Growth Fund managed to attract new money on strong performance, thanks in part to their mirroring strong markets, Weiner said.

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