Identification

The securities contained within stable value funds are often either guaranteed by insurance contracts or are invested in so-called wrapped bonds. These bonds are guaranteed for a certain level of return by an insurance company, which pays the difference if the bond fails to perform up to that level. As long as the bond insurers remain solvent, a stable value fund will pay back the principal invested along with the guaranteed returns.

Function

In certain markets, stable value funds provide impressive returns relative to other funds. While the annual appreciation rate may not cause anyone to sit up straighter, they do offer guaranteed returns at a relatively high rate. Stable value funds can be used to secure a portfolio, as they make an excellent candidate for an iron-clad fixed income section with superior returns relative to both government bonds and FDIC insured savings accounts.

Warning

The major hidden risk contained in every stable value fund is that of an eventual insolvency on the part of the bond insuring company. The value of the investments depend strongly on whether or not the bonds are properly insured. If an insurance company goes bankrupt, they may not have to honor their contracts. However, it’s more likely that the company’s performing assets—like the bond insurance contracts that underlie stable value funds—will be auctioned to other, solvent insurance companies.

Considerations

Resources

More Like This

Lowest Risk & Stable Retirement Income Mutual Funds

Value Funds

Mutual Funds vs. Stable Value Option

You May Also Like

The stable value fund is not a true investment, but it is a good place to stash cash while evaluating your choices.

Three funds recommended by Zack's, a company that rates stocks and mutual funds, are the Putnam Convertible Bond Fund (PCONX), the Franklin.

When you are retired, protecting your wealth and investment income are much more important factors than long-term growth potential. A mutual fund.

Most 401k plans include a stable value fund, and that fund is designed for absolute safety of principal. Stable value funds provide.

The stable value funds offered by 401k plans are similar to money market funds in that they seek to maintain a steady.

Value stocks are issued by companies that are stable and pay. Blend funds, which combine growth and value. How Do.

A gold fund allows an investor to profit when gold increases in value without having to store and. Mutual Funds. INVESCO.

One way to diversify your portfolio is by investing in a blended mutual fund, or blend fund. This type of fund contains.

The yield on money market funds generally is the lowest yield of all mutual funds, but these are considered safe and stable.