U.S. stock mutual funds post inflows for October

American investors turned positive on U.S. stock mutual funds in October for the first time since April, although foreign-stock funds continued to be far more popular, new data show.

Mutual funds that invest primarily in domestic stocks had a net cash inflow of $406 million in October, compared with an outflow of $2.9 billion in September, the Investment Company Institute reported Wednesday.

Foreign stock funds attracted a net cash inflow of $11.8 billion in October, after an inflow of $9.5 billion the previous month, the institute said.

Net cash inflows are new purchases minus redemptions by investors cashing out.

Americans have heavily favored foreign stock funds over domestic funds for the last two years. Many foreign stock markets have risen faster than the U.S. market in this decade, after lagging behind in the 1990s.

U.S. stock funds had outflows in August and September even as major market indexes rose. As the rally continued in October the outflows turned to inflows.

Bond funds had a net inflow of $10.6 billion in October, up from $4.6 billion in September.

Money market funds were the big winners in October, taking in $32.5 billion in new cash, up from $15.4 billion the previous month.

The large inflows to money market funds suggest that many investors are staying on the sidelines, content to earn about 5% on their money. The average annualized compound yield on money funds was 4.85% in the seven days that ended Tuesday, according to Imoneynet.com.

Money market fund assets totaled $2.2 trillion as of Oct. 30, the institute said. Stock fund assets totaled $5.7 trillion and assets of bond and so-called hybrid funds totaled $2.1 trillion.