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Mutual funds attract record $81 billion in January

February 27, 2013: 3:43 PM ET

After taking money off the table toward the end of 2012, individual investors came back with a vengeance in January, adding a record $80.6 billion to their mutual fund holdings, according to the Investment Company Institute.

Investors added nearly $38 billion to stock funds during the month, with a little more than half of that flowing into international stocks.

Nearly $33 billion, or 41% of the total monthly inflow, went into bond funds.

That doesn't come as much of a surprise. Investors have shown a strong attraction for bond funds since the financial crisis. While the bet has paid off so far, experts are warning that ongoing investment in bond funds could leave investors with heavy losses when interest rates begin to rise.

Hybrid funds, which invest in both stocks and bonds and have been a favorite among investors since the beginning of 2012, raked in a record $9.8 billion in January.

Related: The myth of the Great Rotation

While February is on track to be a positive month for mutual fund flows, it will likely be far from a record. During the first two weeks of February, mutual funds have lured in just under $24 billion, according to ICI. Investors have continued to show an appetite for international stock funds, bond funds and hybrid funds this month, but enthusiasm for U.S. stocks has begun to dampen.

The inflows have been weakening as the market rally has lost some of its mojo. Both the S&P 500 and Dow Jones industrial average rallied more than 5% in January, but are up just over 1% in February.

Investor fear is also on the rise, with worries about Europe picking up again. After being steeped in greed for most of the beginning of the year, CNNMoney's Fear & Greed Index has fallen sharply throughout the month. Earlier this week, it tumbled into neutral before bouncing back into greed.

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Hibah Yousuf
Hibah Yousuf
Reporter, CNNMoney

Hibah Yousuf is a reporter at CNNMoney, where she covers stocks, bonds, commodities and currencies trading across the globe, as well as corporate earnings and other markets-related news. Prior to joining the site in 2009, she interned at Money Magazine.

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