Selling At The Bottom

Paper losses become real.

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Today the WSJ looks at the safe(er) spots in the market including money market funds, stable-value funds, short-term bonds where investors are stashing cash in an effort to protect their shrunken nest egg. None of them look great. Then there's this:

The concerns are cropping up at a time when many retirement-plan participants, facing devastating losses in their stock portfolios, want to preserve what is left of their nest egg rather than betting on a market rebound. In March, 90% of the money transferred in a large group of 401(k) plans tracked by consulting firm Hewitt Associates LLC went into stable-value funds.

That stat shows a lot of fear among everyday investors, and rightfully so. But if you gave up on stocks in early March you missed a big chunk of the 25 percent rally in the Dow since the March 9 lows. Whether it's a bear rally that'll sink again is an open question, but yields on stable-value funds are 3-4 percent (and could be lower this year). If you're retiring soon, wealth protection is understandable. But if you've got a decent amount of time until retirement, it might be worth weathering the market's swoons to catch the rally off the bottom.

  • Kirk Shinkle

    Kirk Shinkle is a senior editor for U.S. News Money and manages the Best Funds portal. Follow him on Twitter @KirkS or email him at kshinkle@usnews.com.

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