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Mutual funds attract record amount of cash in 1Q

The stock market hit a record high during the first quarter, and so did the flow of cash into mutual funds.

Stock funds and bond funds attracted a combined $193 billion in the first three months of 2012, industry consultant Strategic Insight said Wednesday. That tops the previous record of $140 billion in net deposits during 2007’s first quarter.

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It also was a record when factoring in exchange-traded funds, which hold less cash than mutual funds but are growing at a faster pace. Net deposits into conventional mutual funds and ETFs totaled $246 billion. The previous record of $173 billion was set in last year’s first quarter.

This year’s figures suggest that investors are getting comfortable with stocks again following the financial meltdown and market plunge of 2008-2009.

Withdrawals from US stock mutual funds exceeded deposits for the past six years in a row, while bond funds attracted more than $1.3 trillion in net deposits.

This year investors have added $48 billion to US stock mutual funds and $60 billion to funds investing in foreign stocks.

Deposits into stocks helped push the Dow average toward a record reached on March 5, and the market has since pushed higher.

$193b

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A broader index, the S&P 500, has risen 11 percent this year and also is at a record high. Investors have been encouraged by strong earnings reports, improvement in the economy and housing market, and by the Jan. 1 agreement between Congress and the White House to avert the worst effects of the fiscal cliff.

Avi Nachmany, Strategic Insight’s research director, said two trends appear to be playing out. Investors are becoming less risk-averse and adding cash to stocks. And cash is being shifted from low-risk investments like money-market mutual funds to relatively conservative income-generating investments like bonds and dividend-paying stocks.

‘‘As investors move from the sideline, we observe two great rotations in parallel, and both should persist,’’ Nachmany said.

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