WEALTH MANAGER-U.S. bonds may no longer be a safe haven

* Investors sticking to bonds despite inflation risk

* Advisers trying to edge clients back into equities

* Investors should avoid Treasuries, munis-executive

NEW YORK, Nov 9 (Reuters) - The flood of money into the fixed-income market this year is raising concern another bubble could be brewing, but nervous investors remain reluctant to return to equities.

Individual investors typically chase returns and analysts agree equity markets may offer greater potential than bonds, which have soared in price since the 2008 financial crisis. Yet fear has the upper hand on greed so far and that has Brown Brothers Harriman Chief Investment Strategist G. Scott Clemons worried.

“They’re not chasing returns as much as fleeing risk, or what they perceive to be risk,” Clemons told Reuters. “But they’re going right into the risks posed by bonds.”

About $59 billion left U.S. equity mutual funds this year through the end of September, while $243 billion piled into bond funds, according to the Investment Company Institute.

The trend is even more pronounced since the May 6 “flash crash,” as money spilled out of U.S. stock funds every week through the end of October, ICI said.

Investors have long fled to the safety of government and top rated corporate bonds, but Clemons contends this is no longer a wise strategy with yields driven down to paltry levels. Bond buyers now face a number of risks.

These include the threat of future inflation and rising interest rates, which have become even more of a concern following the Federal Reserve’s latest round of quantitative easing, said Clemons.

There is also the credit risk associated with municipal bonds backed by shaky tax-exempt issuers.

“Most investors historically thought of bonds as the anchor of stability in a portfolio,” said Clemons. “The anchor is not as trustworthy as it once was.”

Clemons is advising clients to avoid Treasuries and municipal bonds altogether and only hold high-grade, short-term corporate bonds.

Meanwhile, 65 percent of his average client portfolio is in equities. He favors big companies that make or distribute essential products and services and have enough free cash flow that they do not have to depend on banks for financing, such as Wal-Mart Stores Inc WMT.N and Coca-Cola Co KO.N.

Still, it can be difficult to persuade clients who have been battered by equity markets over the past couple of years to give them another chance.

“People just think of the last thing that happened to them. They think they’ve only ever lost money on equities and they forget about the money they’ve made,” said Jim Heitman, an Alta Loma, California-based adviser.

Heitman tries to give clients a reality check by showing them a projection of what their financial future will look like if they stick with low-yielding fixed income and cash-like investments versus putting some money in the equity market.

He adds that stocks, like housing, goes through cycles.

“I tell them, do you remember when the value of your house was going up and up and what happened then?” said Heitman. “It helps them understand that cycle in other asset classes.” (Reporting by Helen Kearney; editing by Andre Grenon)