Faced with erratic stock markets, some 401(k) plan participants are shifting to what they once considered a dull alternative–stable-value funds. But are investors pursuing the illusion of safety at the cost of long-term growth?

Experts worry that might be the case. Over the past 18 months of market tumult, there has been a significant shifting of 401(k) assets into stable-value funds and away from equities. In fact, according to Hewitt Associates, the allocation to equities in all 401(k) plans dropped to 67% from 74% between October 2000 snd February 2002, while the allocation to stable value funds climbed to 21.1% from 17%.

No doubt, part of the decline in equities is attributable to poor stock market performance and the consequent diminution in value of the stock portion of any investment portfolio. Still, the decline seems excessive to experts, given that many professional pension managers have been using the past downturn to buy stocks to rebalance portfolios. "There's been a pretty dramatic shift in overall allocations, and it suggests that participants don't yet understand the idea of rebalancing," says Lori Lucas, a defined benefit consultant with Hewitt.