Investors are pouring a lot of money into mutual funds, but they are also cashing out more and more shares-and that is slowing the growth of the industry.

"You're still seeing quite a bit of cash coming into mutual funds," said David Haywood, an analyst with the Boston fund researcher Financial Research Corp. "What is driving the slowdown in net sales is redemptions."

Net cash flow into stock and bond mutual funds in May was $14.2 billion, half of the year-earlier figure, according to the Investment Company Institute.

Investors cashed out 22% of the assets in mutual funds in May, up from 21% in April and 18% in May 1998. That, along with falling stock and bond prices, helped push total assets to $5.87 trillion in May, down nearly 1% from the previous month.

And the slowdown is not confined to May. Through the first five months of the year, net flows into long-term funds were $89 billion, compared with $148.9 billion a year earlier.

But Mr. Haywood said demographic and other factors point to flows into mutual funds remaining strong for at least the next few years.

The high redemptions are probably because of investors taking the profits accumulated over the last several years to buy cars and other big- ticket items, he said. That is a likely explanation because consumer confidence levels are high now, Mr. Haywood said, and investors are confident a continuing bull market will replace the money they spend.

"They are basically spending the earnings run-up of the last five to 10 years," he said.

Another, less important factor appears to be investors using mutual fund money to trade individual securities over the Internet, he said.

While redemptions are up, new sales of mutual fund shares are outstripping last year's levels, the Investment Company Institute data show.

New sales of stock mutual funds in the first five months of the year were $381.6 billion, up from $304.8 billion a year earlier.

As has been the case over the past several months, a few mutual fund companies are racking up the majority of new investment.

Fidelity Investments, Vanguard Group, and Janus accounted for 71% of the industry's net flows in the first five months of the year, according to Financial Research. Pamela Dawson, the president of Washington Mutual Inc.'s brokerage arm, said her unit has seen a spike in redemptions, but she predicted that redemption rates at banks will drop next year as they figure out ways to retain those assets.

One reason banks are likely to push to protect their assets is that many of them have new proprietary fund families and are keen on increasing their assets to make them viable, she said.

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