“Investors showed their continued conservatism by withdrawing a net $8 billion from stock funds in February while adding $19 billion in new money to bond funds. The pattern of stock-fund withdrawals and bond-fund purchases has continued so far in March.”

NEW YORK, 24 March 2003 — As The Combat in Iraq heated up Thursday, stocks eked out a seventh consecutive day of gains. But amid the uncertainty of how the US invasion will progress, many mutual-fund investors remain in a conservative mode.

Their foremost concern, many of these investors say, is the lack of any recovery for their portfolios after three years of bear-market declines. The war with Iraq has just added another layer of uncertainty to their already fragile market outlook.

Investors showed their continued conservatism by withdrawing a net $8 billion from stock funds in February while adding $19 billion in new money to bond funds, according to estimates released yesterday by Lipper Inc. Investors now have taken money out of stock funds in eight of the past nine months, including the past three months in a row.

The new money going into bond funds was the largest monthly total since August 2002 and the third-highest on record, Lipper said, though February’s figure was still dwarfed by the $27 billion added to bond accounts in July 2002. Some US Treasury-bond funds, including those investing in inflation-protected Treasury securities, are becoming increasing popular with investors, according to Lipper.

The pattern of stock-fund withdrawals and bond-fund purchases has continued so far in March, according to weekly surveys by AMG Data Services of Arcata, Calif. However, stock funds did see net inflows in the week ended Wednesday, the period that included the stock market’s anticipatory war rally, AMG found.

To be sure, a large number of investors aren’t making any significant changes in their portfolios for now, as they wait to see how the Iraqi situation plays out. Meanwhile, some investors seeking a respite from the volatility of stocks are putting money in real-estate investment trusts or preferred stocks. Still others have sought equity-like returns through high-yield, or “junk,” bond funds.

On Thursday, the trading desks at several big mutual-fund companies were relatively quiet as everyone tried to get a handle on events during the first day of fighting. “During war, markets trade off noise and people stop investing,” said Bill Wilby, lead portfolio manager for the Oppenheimer Global Fund. “It’s insanity to trade off the noise,” he added.

Call volumes to T. Rowe Price Group Inc. in Baltimore were running at expected levels for mutual-fund customers on Thursday and 28 percent below projections for brokerage-account customers, the firm said. Indeed, calls all quarter have been down compared with the first quarter last year, with retail investors calling 20 percent less, according to Daniel E. Robbins, a T. Rowe assistant vice president.

One T. Rowe customer, 68-year-old Robert Woods of Rockville, Md., a midlevel manager at the Department of Energy nearing retirement, moved all his stock-fund assets into a Treasury money-market fund about a week ago.

“I took the calming way out,” said Woods, who figures his current portfolio is about adequate to let him keep his standard of living in retirement. To be coaxed back into stocks, “it needs to get back to where there’s some organization to the market that I can see that makes sense,” he said.

Judy Bartro, a 36-year-old stay-at-home mother in Portland, Conn., said yesterday she has been waiting to fund a college savings account for her daughter.

“I’ve been sitting on a large amount of cash waiting for the war,” Ms. Bartro said. Still, she plans on waiting at least a few days more, to see how the war progresses. “One thing everyone knows is that the market doesn’t like uncertainty,” she said. “And we’re in really uncertain times right now.”

With the approach of war, 64-year-old Judy Eberhart, a former marketing manager for BellSouth Corp. in Birmingham, Ala., worried about further financial damage to her portfolio that was down by about a third since 2000.