People Cashing Out of the Market Need to Find a Low-Risk Haven . . .

You can run, but where can you hide?

With the stock market gyrating wildly, bonds troubled by alternating inflation and recession fears, and real estate foreclosures making headlines every day, simply bailing out might be the most comforting thing to do. But finding a good place to park the resulting cash is a challenge.

Investments that provide strong assurance against loss tend to pay modest returns, and those that offer a better yield can sometimes go south, taking investors' principal with them. What's more, most experts advise against selling in a downturn, especially if you are investing for the long term.

But if moving some funds to the sidelines is for you, there are a number of safe choices. After inflation and taxes, these safe havens may offer little more than break-even returns -- but breaking even may not seem so bad compared with what has happened recently in the stock market and real estate.

So what to do?

At the extreme end of the safety spectrum are securities issued by the U.S. Treasury. These are, as far as a loss of principal is concerned, about as safe as it is possible to be. But to get that level of safety in today's market, you have to be willing to accept an interest rate in the 3 percent range -- a trade-off that makes many people unhappy.

"Everybody's looking for a free lunch, but especially in the cash area, there is no free lunch. As soon as you move off of Treasurys, risk comes into play," said financial adviser Mary A. Malgoire of the Family Firm in Bethesda.

But if safety is your priority, Treasurys offer some advantages.

First, when you "buy" a Treasury security, you are really making a loan to the U.S. government. In return, it promises to pay interest and to repay you at a certain date, when the security is said to "mature." So if you buy one of these and hold it to maturity, you'll get your interest payments and your money back, barring anything short of a government default -- in which case we'll all have a lot of other things to worry about.

Unlike Treasurys, which you can buy and sell on the open market, you can also get "non-marketable" securities from the government, the best known of which are U.S. savings bonds.

Savings bonds are meant for small savers, but in recent years, the Treasury Department has imposed a number of rule changes that have made the program increasingly confusing to many.

For example, you can buy bonds electronically from the Treasury or paper versions through financial institutions or employer payroll savings plans. But with Series EE bonds, the electronic ones are sold at face value -- $100 for a $100 bond that then begins accruing interest -- whereas the paper ones are sold at half their face value and mature at full face value. In other words, with paper, you buy a $100 bond for $50 and interest grows it to $100 at maturity, which the Treasury guarantees to be within 20 years. Paper bonds take longer to mature than electronic ones.