What is a stable value fund, and how would it fit in my portfolio? --T.W., via e-mail
A stable value fund is a type of fixed-income investment. Stable value funds are less volatile than intermediate-maturity bond funds but recently have paid a lot more than money market funds. They are available only in employer-sponsored retirement plans (not IRAs); about half of 401(k)s and about two-thirds of 403(b) and 457 plans offer them.
Over the past year through February 28, the Hueler stable value pooled index, which measures the total return of stable value funds, returned 1.7%, while money market funds earned nothing. “A stable value fund can add ballast to your portfolio and is a great vehicle for parking the money you might be withdrawing soon in retirement,” says Judith Ward, a certified financial planner with T. Rowe Price.
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