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RISKY FUNDS FAVORED OVER SAFER STOCKS

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Despite continuing fears that rising interest rates will depress stock prices, individuals are favoring high-risk equity mutual funds over more conservative stock portfolios, according to data gathered for Money magazine's Small Investor Index.

AMG Data Services of Arcata, Calif. reports that net sales of four riskier types of mutual funds - growth, aggressive growth, emerging growth and international - totaled $2.7 billion in July. In contrast, only $503 million flowed into the more conservative growth and income, equity-income and convertible funds. Such funds typically attract far more money than aggressive ones - often as much as five times more.Fidelity's 18 aggressive growth funds drew $180 million in July, while its growth and income funds brought in $162 million. Scudder's 10 higher-risk funds, including seven international choices, brought in $48 million in July, vs. $22 million for its three growth and income funds. By contrast, in June, Scudder's aggressive funds were hit with $44 million in redemptions, while its conservative funds brought in $33 million.

Many stock market strategists agree that investors are right to buy aggressive stock funds.

"High-growth market sectors like telecommunications and medical technology have been hammered by losses of 50 percent or more, because of disappointing earnings," said investment adviser Heiko Thieme of New York City.

"At today's depressed prices, these stocks offer much more potential reward than risk."

Last week, the Money Index, which tracks the typical investor's holdings, dipped $9 to $45,505. Stocks gained $30, and bonds lost $51. CDs and money-market funds kicked in $10. Gold added $3.