U.S. stock index funds have posted net deposits every year since 2001, according to Morningstar Inc., a Chicago-based research firm. Investors have similarly poured $851.5 billion into ETFs for all asset classes from 2001 to July 2011. Unlike mutual funds, ETF trade throughout the day like stocks.

Bond funds also have been winners, adding $75 billion in deposits this year, while funds that buy non-U.S. stocks took in $15 billion, according to ICI.

"Over the past couple of years and especially the past couple of weeks, I have heard a large number of clients and acquaintances express fear and dislike for the stock market," Eitan Tashman, a financial planner in Beverly Hills, California, said in a phone interview. While "many investors are scared of the volatility and seeming instability of the stock market and would even like remove their money from the stock market," there are few alternatives, he said.

Baby Boomers

The post-World War II generation known as the baby boomers is the largest group of investors in mutual funds, said Geoff Bobroff, an investment-management consultant in East Greenwich, Rhode Island. As they go into retirement, they might not return to equities after two bear markets and the volatility this year, he said.

"They are already thinking now about their retirement years," Bobroff said. "They may be in fixed-income of different flavors, but equities may no longer be on their horizon."

The recent volatility makes Mark Beller, 42, a physician in Northridge, California, want to put more of his money into real estate.

"The market is so volatile, 1,400 points in a week? Give me a break," Beller said in a phone interview. "I have money to invest, and my portfolio is down about 15 to 20 percent, so I'm going to wait for it to come back to where I feel comfortable."

Cash is King

Younger investors aren't replacing their retiring counterparts. Cash holdings are at the highest levels since the record in March 2009, according to an Aug. 16 survey by Bank of America Merrill Lynch. Investors from 18 to 30 years old have the highest cash position of any age group at 30 percent of their portfolio, MFS Investment Management said in an Aug. 8 report. Almost three in five investors cite fear about volatility or needing money someday as a reason they hold high or increasing levels of cash.

"Investors are in cash for a reason and, regardless of time horizon, conventional investing wisdom no longer applies," William Finnegan, senior managing director of retail marketing at the Boston-based firm, said in the report. "The Great Recession of 2008 has had a profound and longer-lasting impact on investors' confidence than expected."