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I am interested in Stable value funds. When compared to bonds they seem to over competitive rates (2-3 %) and avoid the rising interest problem. I see that some companies have liguidated their funds recently (schwab). What can you tell me?

May 15, 2013 by John from Marietta, GA in  |  Flag
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Past performance does not guarantee future results. Focus on reducing the cost of your cash flow and building accessible pools of money in a variety of areas (equity, real estate, bank funds, qualified and non-qualified assets, cash value, etc). The question really is - what is the COST to use your money, when you need to spend it. Many factors to consider here, your age, income, savings potential, personal inflation rate. Take a look at this blog post for further understanding that one product is not the answer - it is the integration of many.

Comment   |  Flag   |  May 15, 2013 from Grand Blanc Township, MI

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John P. Duncan Level 18

Is this money you will need in the near future? The reason I ask is if the answer is no, I believe a a properly positioned group of uncorrelated exchange traded funds would be prudent. Also, you could use the etf portfolios to take advantage of much stronger upside with great diversification as well. Check out Ishares and vanguard for listings of many etf's. If not experienced with these, please seek a professional and/or do your own research.

Comment   |  Flag   |  May 15, 2013 from Mesa, AZ

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Rich Winer Level 20

Depending on the rates available, a stable value fund could be a beneficial part of a diversified portfolio. Within the bond portion of my mutual fund portfolios, I invest in a variety of fixed income funds including floating rate funds, strategic funds, short duration funds, intermediate term funds, foreign and emerging market bond funds, etc. A stable value fund could work nicely in coordination with these types of funds depending on your financial situation, goals, risk tolerance and time horizon. Remember that there are risks in all types of funds, even some money market funds have run into trouble in adverse market conditions. Also, I believe that the rates of interest stable value funds pay can change and some are less liquid than others. I have seen stable value funds in variable life, annuity and 401k products that had lock-up periods or reserved the right to delay distributions for up to 12 months in adverse market conditions. . So, do your homework and consider consulting with a financial advisor.

Comment   |  Flag   |  May 15, 2013 from Woodland Hills, CA

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John, stable value funds fluctuate much less than bond funds, but they still participate in interest rate risk. In a rising interest rate and rising inflation environment, you could see your returns decrease, even to the point of being below the rate of inflation

If you are concerned about safety or income, a stable value fund may be a compelling choice. It is generally most suitable for people at or near retirement, as it is a conservative investment and there is not very much growth potential

Comment   |  Flag   |  May 17, 2013 from Delray Beach, FL

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