Worried Investors Turn to Old-Line, High-Yield Stocks
NEW YORK -- Small investors, worried about a recession but afraid of missing out on the stock market's gains, are turning to a conservative old standby: high-yielding stock mutual funds.</br></br>These "may not be high-flyers, but they get you back into the equity market without a lot of risk," says Lawrence Kantor, executive vice president at Lexington Management Co. in Saddle Brook, N.J.</br></br>Minimizing risk has a high priority for individual investors since the October 1987 market crash, which left many with a distaste for stocks. Millions poured cash into safer money-market funds, where yields sometimes exceed 10%, or Treasury bills, which now yield 8 1/2% or more.</br></br>But recently money managers have noticed an increasing appetite among small investors for stock funds managed with a conservative strategy, especially those that invest in old-line, blue-chip companies that pay hefty dividends. The appeal of such funds suggests that small investors want to play the stock market -- but want a cushion in case a recession develops.</br></br>T. Rowe Price Associates' Equity Income Fund, the firm's most conservative stock fund, expanded its assets 70% this year to $850 million from $500 million. Its total return, price gains plus dividends, advanced 22% in the 12 months through May 4; it has risen 8.5% so far this year.