BOSTON » Investors are finally inching back into the stock market. But are they too late?

While millions sought refuge in traditionally stable bonds over the past two years, they missed a more than 90 percent rally in stocks. Suddenly bonds don’t look so safe, and some of the $11 trillion that Americans have parked in mutual funds is shifting back to stocks.

After putting more than $570 billion into bonds over the past two years, mutual fund investors reversed course last fall, worried that the prospect of rising interest rates and the growing deficits of state and local governments were bringing bond prices down.

In the last two months of 2010, investors withdrew a net $23 billion from bond funds, according to industry consultant Strategic Insight.

At the same time, corporate bottom lines are improving. So investors are finally starting to take another look at stocks after being burned in the 2008 financial crisis and scared by the market’s "flash crash" single-day plunge in May.

"Most investors have been in a capital-preservation mentality, because they saw so much of their net worth destroyed in the bear market," says Chris Jones, chief investment officer with J.P. Morgan Asset Management.

Few have fully recovered since the stock market began sliding from its historic peak in October 2007. The Standard & Poor’s 500 index is 17 percent shy of that level, despite recent gains.

The momentum has shifted, and now, with a couple of years of solid market performance, many risk-averse investors may be ready to get back in. But there are cautionary voices.

The economic recovery is still fragile in the eyes of Tom Roseen, an analyst with fund-tracker Lipper Inc.

"I wouldn’t be surprised if we have a little bit of a pullback over the next couple months, as people re-evaluate their portfolios and take a look at how much the market has gained," he says.

Until recently, investors got a decent return from their play-it-safe strategy. Diversified bond funds gained an average of 10.8 percent last year, beating their average annual gain of 6.2 percent over the past five years, according to Morningstar.

Still, nearly all types of bonds lost money in the fourth quarter.

Many stock market pros are predicting another year of double-digit gains. They point to several positive economic indicators: factories cranking up production, hiring activity picking up, growing corporate investment in technology. Consumers also are more confident.