The headlines are scary. Big-name financial institutions heading for bankruptcy, in desperate need of merger partners or government bailouts, and even the safest of havens — the kind where losses are supposed to be inconceivable — has had ugly news.

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The headlines are scary. Big-name financial institutions heading for bankruptcy, in desperate need of merger partners or government bailouts, and even the safest of havens — the kind where losses are supposed to be inconceivable — has had ugly news.

It’s enough to make a lot of investors want to take their money out of the market and stuff it in their mattress, piggy bank, or bury it in jelly jars in the side yard.

Any one of those steps would be the Stupid Investment of the Week.

“Going to cash” is one thing, a strategy some people are using to insulate themselves against the short-term volatility of the stock market.

“Taking your cash” is something entirely different, and judging from news reports, chat rooms, message boards and e-mails and calls from average investors, it’s happening now in a misguided effort to get what “Frank the bus driver” described to me as “the ultimate protection.”

Stupid Investment of the Week highlights the conditions and characteristics that make an investment less than ideal for the average consumer, pointing out the foibles and conundrums investors sometimes get into when trying to do the right thing.

Putting money in a piggy bank, under normal circumstances, hardly rates as an “investment,” but the people who are pulling the proceeds of big investment accounts are making a decision that could have a long-lasting impact on their finances, putting them in harm’s way on purchasing power risk.

Moreover, they’re not stuffing the mattress to save for a rainy day, but instead are acting as if the apocalypse has arrived and they want a big horde of greenbacks in their bomb shelter.

Emotions — most often fear and greed — rule investment decisions, and pulling the money out of all financial institutions, or even most safe havens like money-market funds is clearly a case of running scared.

Yes, some money-market mutual funds broke the buck recently. On Sept. 16, the Primary Fund — part of the Reserve funds and one of the oldest money-market mutual funds in the industry — declared some Lehman Brothers commercial paper to be worthless.

Several other fund firms bought back bad paper from money funds to make sure they did not suffer a similar fate. And on Sept. 18, Putnam Investments announced that it would close an institutional money fund that had suffered a significant run on assets; it’s not clear yet whether redemptions and liquidations will be processed at the static $1 per share that is the hallmark of all money funds.

It’s heavy stuff, in part because safety-conscious investors feel violated, like someone broke into their piggy bank.

But even in the worst-case scenario — the Reserve situation — the loss was 3 cents per share, on shares worth $1. Since Reserve was paying more than 3 percent in interest, on an annualized basis a long-term shareholder who got caught in the squeeze simply gave back their interest.

Not fun or nice, certainly, but not catastrophic in most cases either.

Put another way: There’s $3.5 trillion in money funds. The worst disaster or scandal in the money-market fund industry resulted in a 3 percent loss on a fund that had less than seven-tenths of 1 percent of the assets in the industry.

In that scandal, someone who had been in the fund for the last year would not only have come through the year positive, but their performance would still have been superior to what they’d get from having kept that money in the mattress.

“It’s like being on an airplane, and now you are flying through full-blown turbulence,” says Peter Crane of Crane Data, which tracks money-fund performance. “And because you don’t like the turbulence, you’ve decided to jump out of the plane. … It may not be the best way to have a safe landing.”

Just as important, money in the mattress, in Mason jars and the like faces its own set of risks, everything from theft to fire to loss of purchasing power by not even attempting to keep pace with inflation.

It may feel good while you do it, but it’s not the right move for the long haul, even in these troubled times.

On a radio show two weeks ago, the host asked me if it was “the right time to panic,” as if there is such a thing. I suggested that the only proper time to panic would have been long before you could actually sense trouble; lacking that foresight, you’re on the plane and the ride is bumpy but the statistics say your best bet is riding it through to the end.

That does not mean someone who is nervous now needs to be fully invested, or that they should not go to cash if that’s what makes them comfortable with part or all of their money. It means that it’s silly to suffer the loss of 2 or 3 percent — the amount you might get from a money-market fund or a bank deposit account — in order to avoid the chance of taking a loss that is not likely to be even that big.

“Death by a thousand cuts is more difficult, and that’s what it feels like for investors right now, when there always seems to be more bad news,” says Lisette Smith of Garnet Group Wealth Advisory in Boston. “But giving up isn’t much of a strategy right now, and knee-jerk reactions to go to safety aren’t that smart, if you have done your homework and have taken steps to make sure you are safe.”

And on Sept. 19, the Treasury stepped in and said it would offer insurance to protect money funds; fund firms have to enroll in the program — and not all of them will — but it’s another reason to trust that the safest of investments will remain safe.

For investors wanting to go a step further, consider Treasury-only money funds — or stick with the biggest fund companies, which have always bailed their money funds out of any troubled paper — or move into banks to gain the protection of the Federal Deposit Insurance Corp.

Just don’t bring the cash home, where it faces far more risks than it does in the market. Seemingly every day there’s a new story of someone

who forgot where they hid the cash, and wound up losing it at a garage sale or during a donation of property, when the old video box, the dresser drawer with the envelope taped to the bottom or the faux-book “safe” was given away or sold accidentally.

“If you want to look for a safer haven, that’s one thing,” Crane says, “but as bad as things have been, you still have no proof that home — subject to your kids, neighbors, vandals, fire and whatever else — is actually safer than a bank account.”

Chuck Jaffe is senior columnist for MarketWatch. He does not own or hold short positions in any securities covered by Stupid Investment of the Week. If you have a suggestion for Chuck Jaffe’s Stupid Investment of the Week or a comment about this week’s column, you can reach him at or Box 70, Cohasset, MA 02025-0070.