Mutual funds urge calm amid market turbulence

Don't panic!

In a what could be the biggest marketing push ever in the mutual fund industry, big companies are reminding their clients not to be jarred by the wild stock market swings of recent weeks. They're pitching the conventional wisdom: Plan for the long term and don't overreact.

Among the biggest firms in Boston, Putnam Investments sent advisers a "Bear Market Relief Kit" with charts to remind clients how stocks have bounced back from past nose dives. MFS Investment Management posted on its website advice from its chief economist and the message that "While the economic outlook does indeed look grim, there are signs of hope out there." And Fidelity Investments has been running full-page newspaper advertisements that read, "Volatility is to be expected."

"Marketing departments want to create an extra level of comfort and promote the party line that says, 'stay calm and stay with your investments,' " said Neil Bathon, principal of Wellesley data firm Fuse Research Network.

The efforts come as tens of millions of investors watched their net worth rise or fall by thousands of dollars a day in much of September. The swings culminated this week with the Dow Jones industrial average, a broad measure of stocks, plunging 778 points on Monday, then rebounding Tuesday by 485.

Because of the market volatility, some investors have been yanking back their money: AMG Data Services, an Arcata, Calif., company that tracks mutual fund flows, reports outflows of $14.9 billion for the first three weeks of September.

That's a pittance compared to the $4.5 trillion AMG estimates remain in stock funds. But to keep it that way, AMG president Robert Adler suggests, the funds industry has launched its largest advertising and outreach effort ever.

To be sure, even before the current rush, the industry was in the midst of a record advertising period with the top five fund complexes spending $120 million on print, televi sion, and Web advertising in the first six months of the year, up from $78 million in the same period in 2007, according to market research firm TNS Media Intelligence.

Samantha C. Wreaks, publisher of The Journal of Financial Advertising and Marketing in New York, said the current marketing efforts contrast greatly with the last financial downturn in 2001 to 2002, when many firms pulled back on their spending and subsequently lost market shares.

"There is a realization that if you do not tell your own story, someone else is going to do it for you," she said.

Independent financial planners say there's wisdom to the fund companies' message of not panicking - assuming the investor previously has limited risky investments. But sitting tight could be hard to do, or the wrong course, for people with too many aggressive positions, or for those who are close to or in retirement and have less time to make up for losses.

As a result, many firms are rushing to reach investors with their pitches.

Some put details on their websites about the health of their money market funds after a smaller firm, Reserve Management Corp., reported last month that one such fund "broke the buck" or held assets worth less than $1 a share - the first such event in more than a decade. On Fidelity.com, for instance, the Boston fund giant posted letters restating its commitment to its funds and providing more detail than usual about its holdings.

"Fidelity has been much more proactive than I would have expected," said John Bonnanzio, who edits a newsletter for Fidelity investors. "The pressure must have been enormous for them to take that step."

Fidelity spokeswoman Anne Crowley said the company wouldn't discuss its ad strategy in detail but said the money fund disclosures it began last month are meant "to be helpful in these extraordinary market conditions." Frequent postings also help since many of the funds hold securities that mature weekly, she said.

For its part, Vanguard Group, based in Pennsylvania, said up to 500,000 people a day have been logging in to its website, typical of a busy day during tax season and as much as 200,000 more than usual. That's still a small percentage of the 4 million households with accounts at the company, said Tim Buckley, managing director of Vanguard retail investor group.

The number of calls from clients has also climbed, but the calls tend to be shorter in length and so far the firm hasn't activated its "Swiss Army," the term Vanguard uses when it calls employees off their regular posts to handle the phones. Most of the calls are requests for quick updates rather than big portfolio reshufflings, Buckley said.

To calm investors, the firm has been sending an online video to companies whose 401(k) accounts it manages, including the Globe. The video features Vanguard chief executive Bill McNabb trying to reassure - and sympathize with - investors.

For the long-term investor, "the smartest move to make right now is probably to do nothing," McNabb says in the video. But, he acknowledges, "There's no question that from an emotional standpoint, doing nothing can be difficult."

For investors who want to do something, some fund firms offer other options. In addition to a letter from its chairman posted to the firm's website Monday urging investors to "stick with it," Charles Schwab & Co. also had a newspaper ad yesterday that listed its FDIC-insured products such as its checking account and certificates of deposit and the message "a lower-risk investment strategy doesn't have to mean do nothing."

Ross Kerber can be reached at kerber@globe.com.