INVESTORS RETURN TO AGGRESIVE FUNDS.

Byline: Edward Wyatt The New York Times

Cash continues to pour into mutual funds that invest in stocks. But American investors are steering growing amounts of that new money to the riskiest type of funds, the category known as aggressive growth, perhaps indicating that speculative fever among mutual fund investors is rising again.

According to two groups that track mutual fund cash flows, the move back toward aggressive growth funds, which offer investors the highest potential rewards but come with a greater degree of volatility and risk of loss, reverses a trend in evidence through the last half of last year.

At that time, investors began to favor more conservative types of stock funds, including equity income and growth and income funds, after the stock market rumbled with volatility in midsummer and early fall.

The market's volatility was in evidence again Tuesday, as each of the three of the major indexes that track U.S. stock prices fell nearly 1 percent.

The Dow Jones industrial average fell 53.19 points, to 5709.67, while the Standard & Poor's 500 index declined 6.28 points, to 672.23, and the Nasdaq composite index finished down 11.51 points, at 1236.30.

The Investment Company Institute, a mutual fund trade group, reported Tuesday that aggressive growth stock funds took in more than one-third of the $20.6 billion of net inflows recorded by domestic stock funds in April. By contrast, the aggressive growth group took in 29 percent of the $17.5 billion that flowed to domestic stock funds in March, and 27 percent of the total net inflows in January, when domestic stock funds took in a record $20.9 billion.

So far in May, the trend has continued, and perhaps accelerated, according to AMG Data Services, a company in Arcata that estimates weekly fund cash flows.

In recent weeks, emerging growth and aggressive growth stock funds have attracted nearly half of all the money moving into equity mutual funds, up from 15 percent at this time last year.

``Definitely, a more speculative sentiment has entered the market,'' said Robert Adler, president of AMG Data Services.

Investors' appetite for the most aggressive type of stock mutual funds is not surprising, said Jessica Bibliowicz, head of Smith Barney's mutual funds group. ``That's where the performance has been,'' she said, and investors traditionally have poured the most money into the funds that performed best over the previous 12 months.

Adding strength to the trend, funds that specialize in stocks of small, fast growing companies have been the best performers this year, according to Lipper Analytical Services, gaining more than 20 percent since Jan 1. That is nearly twice as much as the average fund that tracks the S&P 500.

While Fidelity Investments and the Vanguard Group, the two largest fund companies in the United States, reported that inflows slowed slightly in May, other fund companies, like Smith Barney, reported continued growth. Bibliowicz said net inflows grew about 15 percent in May from April's level.

State Street Research and Management Co. of Boston reported that May was particularly brisk for its aggressive growth stock funds.