Investors going for income and stability, not growth

First, the good news: Retail funds under management broke through the $20 billion mark in the June 2005 quarter, with strong performances counteracting the effect of heavy outflows. This is the highest level of funds under management since March 2002 and the fourth highest quarter end in history.

Then, the warning: A a sense of security is being favoured by investors, rather than an appropriate risk-return balance which is needed to achieve investment goals.

"It is great to see the level of funds under management continuing to grow steadily," said Binu Paul, research manager at FundSource. "However the trends we are seeing in funds flow are a cause for concern. Investors who have cashed up and perhaps invested in lower risk assets have missed out on some very good returns. They may now also have inappropriate asset allocations for their needs, which is always a risk when you let your emotions interfere with rational investment decisions."

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