Taking the dull road.

How mutual-fund investors react to scandals and market mood swings says a lot about their way of doing things.

Over the past six months they have neither fled in panic nor rushed to join the speculative frenzies of a new bull market. Their most emphatic response has been to step up buying of "moderate allocation" mutual funds.

This makes an unexciting story if your tastes run to high drama and hype. So be it. The fund faithful are used to being characterized as dull.

It tells a livelier tale, though, if you're interested in how funds got so successful in the first place, and why they are an odds-on bet to stay that way.

"Moderate allocation" is a fittingly low-impact term for an approach to investing that helped inspire the idea of mutual funds in the first place. Some of this, some of that--a diversified mixture of stocks and bonds intended to be neither extremely aggressive nor extremely conservative. Moderate, in this case, isn't at all synonymous with wishy-washy.

"A master in any art avoids what is too much and what is too little, and seeks for the mean and chooses it," said Aristotle 2300 years ago. If the Golden Mean looked so glorious to him, who are we to put it down?

According to Financial Research Corp. in Boston, moderate allocation funds attracted $34.6 billion in net inflows last year, trumping their nearest rival among fund categories by more than $11 billion. Other popular types included world allocation and conservative allocation.

Since much of the funds' business these days is done through tax-favored retirement plans, we can infer that the 401(k) crowd is snapping up package deals--funds that "allocate" their investors' money for them in a variety of ways. That seems entirely appropriate.

To spice up the stew, another top seller has been high-yield bond funds, which are notoriously prone to hot and cold spells. All the same, the junk-bond market is a perfect place for mutual funds to show their stuff.

A diversified fund portfolio serves nicely to cushion the biggest risk in junk bonds, which is default by individual issuers. Though market risk remains--heavy-duty market risk, in fact--some investors who would never buy individual high-yield bonds can reasonably consider high-yield bond funds.

Nowhere on FRC's list of the Top 20 categories for December does the word "technology" appear. Emerging markets and small growth stock funds, both of which hold places on the list, together show inflows smaller than large value stock funds.

Another sign of measured restraint among fund investors is fading interest in gimmick funds based on some single theme, idiosyncratic market theory or other marketing gambit. The fresh entries that do hit the market tend to make a virtue of unflashiness. Case in point: Fidelity Investments' autumn 2003 debutant, the Fidelity Strategic Income & Dividend Fund, which by its own description holds a "neutral mix" of common and preferred stocks, convertible securities and real estate investment trusts.

A movement to the middle ground may have its own perils, since even moderation can be overdone. Some of the most blatant gimmickry in fund land--principal-protected funds spring to mind--taps into investors' risk-aversion as much as to their greed.

It also bears remembering that the biggest prizes in modern investing usually go to the bold, not the cautious. No guts, no glory, as they say. Those caveats aside, the idea of the Golden Mean comes with solid long-term credentials. After more than 23 centuries of seasoning, the risk of faddishness is pretty well excluded. So retirement-planning investors who try to protect their wealth while growing it with a philosophy of "moderate allocation" are probably on the right track.