Cash and cash-equivalent investments - traditionally stodgy options for advisors - are gaining appeal as extreme market volatility pushes many clients beyond their comfort zones.

Advisors typically suggest that clients limit cash exposure to between 5% and 10% of their portfolios, or maintain a reserve that is equivalent to between 18 and 24 months of living expenses, in the event of a bear market. But some advisors are increasing their clients' cash holdings and exposure to other "cashlike" short-term investments, particularly to U.S. Treasurys, a safe haven in a brutal market.

"Cash is looking better for a few different reasons," says Donald B. Cummings Jr., an investment advisor with Blue Haven Capital in Geneva, Ill. Cummings says he was concerned that some municipal money-market funds would potentially "break the buck" - or fall below $1 per share. He preemptively moved client funds into plain-vanilla U.S. Treasury money-market funds. Cummings recognizes that Treasury yields are low. For example, the current seven-day yield for the Dreyfus 100% U.S. Treasury Money Market Fund (DUSXX) is 0.51%. However, the strategy is more tolerable for the short term, he says.

"People expect volatility, but no one wants to lose three and four percent on their money-market funds," says Cummings. He's not entirely sold on the Treasury Department's temporary guarantee program for money-market funds, he says, which protects certain shareholders of money-market mutual funds from losses if their funds are unable to maintain a $1 net asset value. The program offers protection for money-market holdings valued as of Sept. 19. Cummings says he's concerned about jeopardizing funds deposited after that time. "We're telling everyone to hold tight for a few months and see how this plays out," he says.

Advisors are also being judicious about investing new cash from clients since the bear market onset in October 2007. Cathy Curtis, a financial planner based on Oakland, Calif., says she's been particularly cautious with several new clients she took on last October, when the market started its decline, whose accounts average about $500,000. Curtis says she invested about 50% of their money at the time and left the rest in cash, including the Schwab Value Advantage Money Fund (SWBXX). "I have been investing it slowly - even over the last month," she says - about $2,500 at a time.