Lately, mutual funds that specialize in stocks have been overshadowed by those glamorous, double-digit-yield sirens, the money market funds. High interest rates and a depressed stock market made the equity funds look dowdy as decade-old clothes.
But new marketing techniques and inflows of IRA and institutional money are giving the funds a more modern style. And, if the stock market pulls itself out of the doldrums late in 1982, as many economists predict, stock mutual funds could blossom into beauties once again.
''The next quarter or two will be a time of maximum investor stress,'' says John Johnson, portfolio manager for T. Rowe's New Horizon fund. ''Beyond that, we're quite enthused.''
Over the years, equity mutual funds have allowed small investors in on the benefits of professional management and a diversified portfolio. And long-term returns have been solid: For the five years ending in 1980, equity mutuals posted a gain of about 33 percent over and above inflation, estimates the Investment Company Institute. For the same period, the Standard & Poor's 500 went down 2 percent, in real terms.
But 1981 meant hard times. Stock mutual funds went down 0.9 percent last year , according to United Mutual Fund Selector. Strandard & Poor's 500 went down 4.9 percent.
''It's our belief that equity funds are now a good value,'' says John Johnson. ''Unfortunately they may become a terrific value.''
The key, of course, to a turnaround for equity mutual funds is a turnaround in the stock market. No one is predicting a bull market beginning in January. But many portfolio managers echo John Templeton, of Templeton mutual fund group, who called United States stocks ''ridiculously cheap'' at a recent annual meeting.
''Once the current uncertainty clears up, we expect good things,'' says John Hartwell of Hartwell Leverage & Growth Funds Inc.
Equity funds, like money funds, could become chic conversation for a finance-conscious public.
''Nobody has been talking about common stocks around the punch bowl,'' says Stephen Barney, portfolio manager for Twentieth Century Fund. ''That's going to change.''
Money market funds have lured many ''beginner'' buyers, who might not otherwise have considered investing in mutual funds. They have also popularized the no-load (no sales commission) method of selling mutuals. Both these developments could help equity funds, say managers, by demystifying mutual funds among young professionals and other first-time investors.
And equity funds are splintering into new, more marketable forms. There are funds that specialize in energy stocks, funds that buy ''junk'' (cheap stocks), and funds that invest only in firms they find morally acceptable.
Aggressive-growth equity funds, such as the Nautilus Fund, which aim for quick capital returns, are the fastest-growing section of the industry. Many of them specialize in glamorous high-tech stocks. Even this segment, says Mr. Hartwell, will be futher fragmented as investment companies tailor their funds to investor preferences.
''The equity field will have even more specialized funds,'' says Hartwell, ''buying technology sub-groups, such as telecommunications.''
As the financial industry diversifies and more and more consumers store excess cash in places other than banks, the industry that offers the quickest, smoothest service may be in a position to win large chunks of new funds. This, claims Stephen Barney of Twentieth Century Fund, is an area where established equity mutual funds can shine.
''Mutual funds have built up tremendous record-keeping ability,'' he says.
And funds such as T. Rowe Price's New Horizon, part of a family of differing types of mutual funds, can offer consumers the flexibility to switch their money according to preference and economic conditions.
Equity fund managers are also bullish in IRAs. The first week in January, Twentieth Century opened 2,000 new individual retirement accounts, says Stephen Barney. And IRAs are accounts investors will add to for years.
''It's a trickle today, compared with what it will be in the future,'' says John Johnson of T. Rowe Price.
Equity fund managers also report the first trickles of what they hope will become a full-fledged river: a flow of institutional money.
''We've had a large number of inquiries in IRAs, but I find more exciting the institutional money we've picked up,'' says Ralph Wanger Jr., president of the Acorn Fund.
The Illinois state employee deferred compensation plan and a university endowment fund have dropped large chunks of their cash into Acorn.
''It's a practical thing for institutions. They get ideal liquidity,'' says Mr. Wanger. In addition, institutions are assured the place they've put their money gets a professional's full attention, as opposed to a bank trust department, ''which is likely to have 200 different accounts.''
''And mutual funds generally get the very best stock-pickers,'' says Wanger. ''We pay more than banks.''
Steve Barney of Twentieth Century says his fund is also getting more institutional money. ''Pension funds have been a bonanza for bank trust departments,'' he says. ''Very little of that has gone to mutual funds.''
But more of it will, he says. ''Over the last ten years, the mutual fund industry has proved it can run money.''