Study Sees Trend Toward Safer Assets

BOSTON (Reuters) - The market declines of 2000 and 2001 did not trigger a flight from investing but caused a general shift to
more conservative holdings like certificates of deposit and diversified mutual funds, according to a study released on Wednesday.

                                        As stock markets rose over the last decade, investors got used to
                                        double-digit returns and analysts feared a sudden market downturn would
                                        provoke panic.

                                        But an independent study by Boston financial research company Dalbar shows that while investors were hurt by
                                        the downturn, they did not turn their backs on the markets.

                                        ``Despite the theory postulated during the rising markets that investors would panic in the face of volatility,'' the
                                        study said, ``reaction to the market has been moderate.''

                                        In 2000 all the major U.S. stock market indexes fell, with the technology-laced Nasdaq (.IXIC) dropping 39
                                        percent, the Dow Jones Industrial Average (.DJI) falling 6 percent and the broader Standard & Poor's 500
                                        (.SPX) declining 10 percent.

The market erosion continued for most of first quarter 2001 and despite a rebound in April, the S&P and the Nasdaq remain off for the year. The Dow has managed
only a 2 percent gain year to date.

Dalbar's study found investors have shifted to more conservative assets, shying away from individual securities and single-sector mutual funds in favor of more
diversified products.

STILL SAVING

But the firm said investors have not cut their overall level of savings. Retirement plan investing continued unabated throughout the downturn, the study showed.

As a result of the market declines, Dalbar said, investors have a better understanding of the need for financial planning and the risk they can tolerate.

Investors told the firm that as a result of the market downturn they expected to hold more cash and diversify their holdings.

They expect to invest more in CDs, savings accounts and money market accounts; put less money into technology and international funds; and cut back on individual
stock investment.

The study results showed a stronger reaction than a 1998 Dalbar survey in which investors shrugged off short-term market turmoil sparked by Russia's debt default.

Only 21 percent of those respondents said they lost money during the market turmoil, compared with 57 percent in the later survey.

``The difference stems largely from the reactions of consumers to short-term versus long-term market fluctuations,'' the study's authors wrote.

``In 1998, the markets had already recovered by the time the survey was fielded,'' they said. ``....In 2001, however, the survey was fielded prior to any significant
market improvements.''

Despite the losses, 61 percent of the later survey's respondents remained confident about investing and saw the market drops of 2000 and 2001 as buying
opportunities.

Dalbar in April surveyed 1,450 U.S. households with incomes of $50,000 or more. The company said the study's margin of error was less than 4 percent.

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