By Meg Richards
The Associated Press

NEW YORK - Judging by where investors put their money last month, they're feeling mighty cautious about the market.

Mutual-fund investment patterns, and the declining number of new dollars investors are willing to commit, suggest a prevailing sentiment that it's fine to miss out on the current market, said Don Cassidy, a senior research analyst at Lipper Inc. What's most worrying to him is that in the process of avoiding short-term risk, small investors may be neglecting their long-term retirement goals.

"People's moods are showing by the kinds of stuff they're going for, and the fact that they're not really going for anything," Cassidy said. An estimated $8 billion flowed into equity mutual funds in July, according to Lipper, down from almost $13 billion in June, a lean period compared to average monthly flows of $25.4 billion earlier this year. The trend is bad news when you consider that equity funds take in $10 billion to $12 billion from retirement plans in an average month. Flows of just $8 billion suggest investments beyond 401(k) and pension contributions may have turned negative, with investors pulling money out of funds.

More revealing than the dwindling amount investors set aside are the types of funds they favored. Flows suggest a potentially profound shift in attitude, Cassidy said.

Unprepared to take on anything more than minimal risk, investors poured $3.9 billion into mixed equity, balanced or hybrid funds.

Pure stock funds took in $4.1 billion, about $3 billion of which went to world equity funds, suggesting investors are in no hurry to buy domestic stock funds in the face of continued uncertainties about the strength of the U.S. dollar.

In another signal of investors' growing aversion to risk, they funneled an estimated $3.3 billion into value funds, and siphoned $1.9 billion away from growth-focused funds.