AGING BOOMERS DRIVE PASSION FOR MUTUAL FUNDS\Industry officials see beginning of growth cycle as average American's\investment rises to $447.

Byline: Floyd Norris The New York Times

Did you buy your $447 worth?

That is what the average person in the United States - man, woman and baby, rich and poor - invested last year in mutual funds that buy American stocks. At the end of the year, that average person owned such funds with a value of $4,074.

Those two figures, both of them records, illustrate how widespread the fund mania has become and how fast it is growing. A year earlier, the average American - there were fewer of them, of course - had domestic stock fund assets of just $2,704.

Some people argue that not much is really happening here, that if you consider the overall picture, Americans are really not doing that much more in the stock market.

Sure they are buying a lot of mutual funds, but they are buying fewer individual stocks, and a lot of those mutual fund purchases are really replacing pension fund assets.

Such arguments, however, should only be allowed to color the picture, not to erase it. A glance at the newsstand shows that publishers think there is much more interest than there used to be, and the circulation figures seem to bear them out.

This is a boom brought on by rising stock prices and growing Baby Boom worries about how they will pay for retirement.

John Rea, the chief economist of the Investment Company Institute, the mutual fund industry group that compiles the cash flow numbers, points out that the industry's success in gathering assets has run in long cycles.

Until 1970, it constantly took in money. Then, from 1971 through 1982, as the stock market went nowhere, albeit with some wide swings, money mostly flowed out.

In early 1982, just as the great stock market boom was about to begin, stock funds had less money than they had contained 15 years earlier.

Fund companies got by with innovations, giving us money market funds at a time when government policies left the banks unable to pay competitive interest rates and then providing bond funds to capture the very high returns available in the early 1980s.

The late 1960s were the last year of mutual fund mania, when young fund managers could quit their jobs and start new funds, with investors showering huge sums on them.

The money was used to buy some fairly dubious stocks, often on terms that prevented the managers from selling them if things went wrong. (There are now limits on such investing by mutual funds, but they were eased a few years ago to let managers go after more attractive prospects. Historical memory has never been a strong point of this industry.)

Comparing eras is not easy, but it is interesting. In 1968, the peak year of that mutual fund mania, the average American put $10 into stock funds. That is equivalent to $45 in 1995 dollars, or about one-tenth of the flow into domestic stock funds in 1995.

The holdings of that average American, also adjusted for inflation, were about $1,000. It looks like this one is a lot bigger.

If it is fund mania that is helping to drive up prices now, the question becomes how it will end. The answer probably is that it will not be panicky fund investors who bring on a bear market; just the reverse.

The 1960s binge did not stop even when performance of the formerly hot funds fell off dramatically; it took a couple of years for that message to sink in sufficiently for withdrawals to begin affecting the industry.