Mutual fund companies ask investors to look at past performance and judge their offerings based on their performance relative to a benchmark.

It's a very rigid approach. And at this dire point in the market, with many investors' lifetime savings cut in half, the standard stay-the-course message is not working. If you need convincing, look at the fact that the best-selling fund category in the nine months through September this year is money market funds.

They took in $223 billion in assets, more than five times the next best-selling category, large-cap blend funds, which took in $43 billion. Even these are paltry figures.

Overall, the industry's total assets are down 20% to $9.6 trillion as of the end of October, from $12 trillion at the beginning of the year. And equity funds have deflated by 40% to $3.9 trillion, down from $6.5 trillion.

Fortunately, some fund companies recognize the drastic change in investors' risk tolerance, among them Fidelity Investments, which is astutely promoting its money market funds, along with FDIC-insured CDs and a new credit card with IRA points. Fidelity is also sponsoring personal finance scenario stories on Yahoo on how people are struggling with the market declines, and planning to revamp its own website to emphasize news.

Besides touting their own safe haven investments, along with fixed income funds, now is a good time for fund companies to launch go-anywhere funds whose portfolio managers can take defensive plays as they see fit, including loading up on cash and short-term instruments.

Just as retailers are trying to lure American consumers with incredible sales, mutual fund companies would be wise to promote lower fees among an ever-increasingly savvy investing public. If that means merging like funds into one another to reduce overhead, investors are likely to understand that.

The name of the game right now is retaining assets, even if that means highlighting money market funds, fixed income, CDs or annuities. Investors realize a bull market is somewhere, somehow around the corner, but emphasizing that right now sounds like a hollow promise.

(c) 2008 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

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