10 years later: How fund investing has changed

A decade ago, as Lehman Brothers went bust and the fragile financial system was teetering, fund investors wondered how bad it could get.

The answer: pretty bad. The S&P 500 plunged 4.6 percent on Sept. 15, 2008, and would incur worse losses in the ensuing months.

Many investors bailed out. For those who held steady through all the tumult of the Great Recession, a decade later they’re sitting on more valuable portfolios.

Along the way, investors have changed not only what they invest in but how they do so. They have less faith in stock-picking fund managers who promise to protect them from downturns. They are seeking the lowest-cost options.

And they’ve largely played it safe, putting much more money into bond funds than stock funds.

Thanks in part to extraordinary

efforts by the Federal Reserve and others to prop up markets, the largest mutual fund by assets, Vanguard’s Total Stock Market Index fund, has returned nearly 190 percent over the last decade. The numbers are similar, if not quite that high, for funds of all different types.

BONDING WITH FUNDS » Investors have been slowly warming up to stocks, putting nearly as many dollars into stock funds last year as they did in 2007, just before the Great Recession. But they’re far more interested in bond funds, which drew three times as many dollars last year as they did a decade ago.

This year, investors have put over 10 times more dollars into bond funds than stock funds through July: $155.8 billion versus $14.8 billion.

THE ASSOCIATED PRESS In this Sept. 15, 2008, file photo, traders work in the product options pit at the New York Mercantile Exchange in New York.