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Mutual funds roundup: That bear's still there

The third quarter left investors grumbling. Brace yourself for more turbulence ahead.

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Can you blame mutual fund investors for feeling it's not safe to go outside?

Almost everyone in the stock market has been trampled by a stampede of bad news.

The subprime mortgage problem that appeared to be contained a few months ago has evolved into a full-blown global credit crisis. A mild economic slowdown, once thought to be over by early next year, now threatens to morph into a more prolonged economic contraction. Several large financial institutions have been forced to merge after wiping out shareholders. And the outlook for corporate profits has deteriorated as many companies retrench because lenders are tightening their fists.

These disturbing developments have taken a heavy toll on stock-fund portfolios and curbed investors' zeal for risky investments.

As the scope of the credit crisis in the United States widened, global stock markets tumbled in virtually the same fashion during the third quarter. With several venerable Wall Street financial institutions collapsing or merging with stronger players and major banks requiring life support from the federal government, investors fled from stocks. But other than Treasury securities and cash, there were few havens. Even money-market funds, normally a secure place to park cash, gave investors a scare. In September, some fund families temporarily halted redemptions in order to safeguard $1-a-share asset values. Meanwhile, stocks, as measured by the S&P 500 index, plunged deeply into bear territory. September's 12 percent drop was that index's worst monthly decline in 10 years.

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