Last year was the second consecutive year of historic inflows into retail fixed-income mutual funds. By the end of 2010, retail investors held $1.23 trillion in actively managed fixed-income mutual funds ($819 billion taxable + $409 billion municipal) compared with $768 billion at the end of 2008 ($470 billion + $298 billion), according to the University of Chicago's Center for Research in Security Prices. That's a 60% increase in just two years.

Those are striking figures, but considering the extreme stock market losses of 2008, it's not surprising fixed income has become so popular. Investment-grade bond funds are typically less volatile than stock funds and are also easily accessible, particularly in 401(k) plans, so they've been a convenient option for investors hoping to reduce risk and put money to work quickly.

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