The rush for safety has reduced yields

Q: Would you give us retirees your view as to the safest place for our hard-earned savings while we are having bank failures? - H.V., by e-mail (one of many asking the same question)

A: For most people, the $100,000 FDIC insurance limit essentially eliminates any risk of loss. Those who have more than $100,000 in their accounts or CDs should act to limit their deposit amount to $100,000. Many people do this by having accounts at multiple institutions.

If you have a significant amount of cash that you want to "park" in a safe place, an exchange-traded fund (ETF) that invests in short-term Treasury bills is a good option. The SPDR Lehman one- to three-month Treasury Bill ETF (ticker: BIL) may fluctuate slightly in value, but it is close to being a money market fund. Unlike money market mutual funds, however, it has an expense ratio of only 0.14 percent, so you get most of the yield. (The average taxable money market fund, according to Morningstar, has an expense ratio of 0.62 percent.)

The current SEC yield on this fund was recently listed as 1.52 percent on the sponsor's Web site (www.ssgafunds.com/etf/fund/etf_detail_BIL.jsp). The same site also lists a year-to-date return of 0.99 percent and an annualized one-year return of 3.31 percent. The distinction between these figures is important. It is possible to be confused about the actual yield (as I was) if you rely on the yield figures on some of the major financial Web sites.

If you look for what BIL yields on Yahoo Finance, for instance, you'll find a yield of 3.3 percent listed. That is really the trailing one-year return, not the current yield of 1.52 percent (http://finance.yahoo.com/q?s=bil).

Morningstar does the same thing as Yahoo, indicating a yield of 3.31 percent (quicktake.morningstar.com/etfnet/Snapshot.aspx?Country=USA&Symbol=BIL).

MoneyCentral (moneycentral.msn.com/investor/partsub/funds/etfreturns.asp?ETF=true&symbol=BIL) doesn't show a yield figure. Instead, it provides a YTD return (1.07 percent) and a trailing year return (3.15 percent) that is slightly different from the sponsor figures.

Another way to check on the current yield is to examine the market data figures on the Bloomberg Web site. (www.bloomberg.com/markets/rates/index.html). It shows a current yield on three-month Treasury bills of 1.52 percent. The low yield is a powerful indication that you aren't the only person seeking safety - a flood of safety seekers has driven the yield on short-term Treasurys to incredibly low levels. A low yield, however, is the price you pay for safety.

The disadvantage of buying the ETF Treasury bill fund is that you'll have to pay a brokerage commission to buy and to sell. Assuming a $20 round-trip commission cost, your return would be lowered by 4 basis points on a $50,000 transaction and by 20 basis points on a $10,000 transaction. Selective investing in three- or six-month CDs at another bank is likely to bring a yield closer to 3 percent.

Q: I know I probably should have done something months ago. I've lost $2,000 in a year in my (Postal Service) thrift plan by investing in the C fund, the one that invests in U.S. stocks. I have less than $8,000 in the plan. I started to save money late in my career. Should I switch to the international stock fund or maybe the bond fund? I retired a year ago and need to watch my money a little more closely. I was going to roll over my account to a big fund company (Vanguard), but I'm not sure. - L.M., Seattle

A: If you are going to be a stock investor, you'll need to accept that the value of your investment will go down as well as up, sometimes by uncomfortable amounts. Living with uncertainty is the price you pay for getting the higher returns that equities have provided to long-term investors.

If you can imagine needing to use every bit of your investment money in only a few years, you shouldn't be investing in equities. If, however, you can imagine not needing some of your money for at least three years, then you should invest a portion of your money in equities.

One of the reasons financial planners create "balanced" portfolios for their clients is to use short-term fixed-income obligations to provide for unusual cash needs in the short term so that long-term investments don't need to be disturbed. Remember, while stocks are subject to great fluctuation in value, most markets recover in a year or two.

International investing is a good thing, but it's not a good choice if your goal is to reduce your risk. Instead, you should be moving some of your money to a fixed-income fund, such as the G fund, the one that invests only in government securities, in the Federal Thrift Savings Plan. And stay with the Thrift Savings Plan.