CRUNCH TIME EXPECTED TODAY FOR MUTUAL FUNDS.

Byline: Charles Stein The Boston Globe

Mutual fund investors didn't bail out of the stock market Monday - but look out below today.

The nation's major mutual funds said Monday that they received an unusually high number of phone calls, but all said only a fraction of investors pulled their money out of stocks. At least one mutual fund firm, T. Rowe Price Associates, in Baltimore, said that near the end of the day, more people were calling to buy stocks than to sell them.

``Maybe investors are as mature as we hope they are,'' said Randy Gore, vice president of DST Systems, which processes trades for mutual fund companies.

It has become accepted wisdom on Wall Street that small investors are in the stock market for the long term and have learned to be patient in times of distress. If anything, they see drops in the market as a time to buy, not to sell.

But few members of the new generation of mutual fund buyers have lived through a day as turbulent as Monday. Edward Riley, chief investment officer of BankBoston Corp., notes that many mutual fund investors have come into the market in the past few years, a time when the stock market seemed to go in only one direction - up.

``This experience is definitely going to test the resolve of the new buyers of mutual funds,'' Riley said.

Others pointed out another potential worry - the relatively small cash positions of most major mutual funds. Many funds have as much as 95 percent of their money invested in stocks. If the market continues to tumble, and investors begin to cash out in a big way, the funds will have to sell stocks to meet the redemptions. This could reinforce the market's slide.

Such a scenario would be particularly painful for Massachusetts because of its high dependence on the mutual fund industry. The major job gains in recent years in the financial services sector have largely been in mutual funds and brokerages. The mutual fund industry employed more than 45,000 people in Massachusetts last year. A serious downturn in business could lead to layoffs, which would depress home and car sales, and could spread to other business sectors, economists say.

Fund companies Monday, however, said they expected no trouble meeting any redemptions. Since the market crash of 1987, they have devised elaborate plans to meet redemptions in case of difficult times.

``Investors are generally staying the course,'' said John Woerth, a spokesman for Vanguard Group, the nation's second-largest mutual fund complex. Woerth said phone volumes were up 20 percent Monday compared to a normal Monday, but he said few investors were shifting money out of the stock market.

Fidelity Investments, which manages nearly $600 billion in mutual fund money, said it experienced a ``slight increase in redemptions.'' A spokesman for the company said phone traffic was heavy but not extraordinary.

David O'Leary, a New Hampshire-based analyst who tracks Fidelity, estimated the firm saw about $250 million flow out of its stock funds Monday, a relatively low figure.

``Tomorrow could be the crunch day,'' said O'Leary.

Both Fidelity and Vanguard deal directly with investors. Mutual fund firms that sell funds through third parties such as banks and brokers said they saw practically no evidence of panic on Monday.

The ranks of mutual fund owners have swelled dramatically over the past 10 years. In 1988, about 24 percent of American households owned mutual funds; by 1996 that percentage had climbed to 37 percent, according to the Investment Company Institute, a trade group for the mutual fund industry.

As of the end of August, investors this year had put about $150 billion into stock mutual funds. In all, stock mutual funds have $2.2 trillion in assets.

CAPTION(S):

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Chart: Mutual Fund Performance