Sure-thing mutual funds?(principal-protected mutual funds)

With worldwide political uncertainty and a domestic economy that's as stable as a punch-drunk sparring partner, it's no wonder investors are jumpy these days.

It's also no wonder that so many of them are responding to the sales pitch for so-called principal-protected mutual funds. Offered by ING, Scudder, and other major investment companies, the funds guarantee that investors will not lose any of their principal if they keep their money invested for a specified length of time. Like conventional funds, PPFs can also rise in value with the market, although investors may not reap the full benefit.

There's no question that the funds continue to attract investors, despite the recent stock market run-up. ING alone manages more than $7 billion in principal-protected assets. But the funds are not a good deal. Indeed, the National Association of Securities Dealers recently posted an investor alert warning that PPFs are unduly expensive, limit investors' options, and lock money away for as long as 10 years. Other funds could give you a comparable return with lower fees and only a little more risk.

A TORTOISELIKE APPROACH

Most of the roughly two dozen PPFs now on the market earmark a large slice of their portfolios for zero-coupon bonds (bought at less than face value, they pay off in full at maturity). The bonds are often augmented with presumably stable, large-company stocks and, depending on the individual fund, futures, options, or other financial instruments.

Proponents say PPFs are ideal for people approaching retirement who can ill-afford cracks in their nest eggs. For other investors, PPFs can counterbalance the more aggressive part of their portfolios. And PPFs provide some comfort, though at a cost, for investors who shrink from the stock market's volatility

"These days, most investors would be thrilled to be getting back what they invested three years ago," says Bard Malovany, a certified financial planner in Annandale, Va. The funds" allow clients to feel comfortable investing in the stock market when they otherwise might keep money in cash."