The 20.9% jump in stock funds for 2003 has erased the perils of the recent bear market from investors’ memories, according to many industry analysts. And that might be a bad sign, Reuters reports.

In August, $22.91 billion poured into stock funds, the largest amount since March 2002. This could very well be a sign that investors are falling into the trap of following short-term market trends – a strategy that usually backfires. Bond funds were in style last year, and people bought into them. This summer, when the bond fund fad faded, investors lost significant capital.

The moral is for investors to keep their portfolios diversified. Stock funds, Reuters says, should be littered with companies large, small, national and international. Buying into bond funds isn’t a bad idea, either, as they gained significantly in the early 2000s when everything else lost.

Financial planner Roger Southward of Pickering, Ohio, told Reuters, "For long-term investors, the best time to buy stock funds is when their prices are down."


The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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