Your question reveals a lot of misunderstanding about the most important investments in your life — your retirement plan! I will give you the answer, in general. BUT I really hope you will walk into the HR department at your employer and ask THEM to walk you through this — step by step. They are the ones who know exactly what you have in your plan– and how appropriate it is depending on your age and financial situation.
What I “think” you have is some sort of stable value fund inside your retirement plan. You can’t make a lot of money on the upside –= limited to 3 percent annually– but they promise you won’t lose any money on the downside. If you were invested in diversified stock market funds, you would have a larger upside — and would be likely to earn more over the long run –and be more likely to reach your retirement goals. But you would also risk losses if the market declines — and that’s what you hear discussed. Several times in my lifetime, the market has entered a “bear market” with losses of nearly 50 percent on the Dow Jones Industrial Average. I should note that the market always came back and moved higher. But those declines can be scary!
If you are nearing retirement and will need to withdraw money to live on, then yu don’t want to take stock market risk. But if you have at least 20 years until retirement, I would recommend some exposure to the growth possibilities of stocks over the long run.