thoughts on a "Stable Value" fund

**kv968** · 01-03-2014, 03:58 AM

Might not be a bad choice. I consider stable funds to be juiced MM funds because they act kind of like a hybrid bond/MM fund. The somewhat stability of a MM but a return of a slightly longer termed bond fund.

The T Rowe Price Fund for example has an SEC yield of about 2% (which is about what an intermediate bond fund currently yields). However it has a duration of about 3 yrs which is about what a short-term bond fund currently has (intermediate bond fund is about 5 yrs). The only difference is the short-term bond fund is only yielding about 0.7%. So you kind of get the best of both worlds. And in the possible rate rising environment we're likely to incur at some point, the shorter duration would help. Using it as a core bond holding might do the trick but you might also want to diversify some of the other bond holdings. What are some of the other bond options in the 401k?

One other thing that may or may not be relevant to your situation is that typically when you invest in a stable value fund you may not be able to transfer that money directly into a MM or competing short-term bond fund. You'd have to instead transfer it to a stock fund and/or possibly a longer term bond fund. Again, that might not even matter to you.

**Snydley** · 01-03-2014, 09:18 AM

Thanks for the reply. The other Bond fund options are (PRRIX) Pimco Real Return and (PTTRX) Pimco Total Return Instl) (described below).

PRRIX: The investment seeks maximum real return, consistent with
preservation of capital and prudent investment management.
The fund normally invests at least 80% of its net assets
in inflation-indexed bonds of varying maturities issued by the
U.S. and non-U.S. governments, their agencies or
instrumentalities, and corporations, which may be
represented by forwards or derivatives such as options,
futures contracts or swap agreements. It invests primarily in
investment grade securities, but may invest up to 10% of its
total assets in high yield securities ("junk bonds") rated B or
higher. The fund is non-diversified.

PTTRX: The investment seeks maximum total return, consistent with
preservation of capital and prudent investment management.
The fund normally invests at least 65% of its total
assets in a diversified portfolio of Fixed Income Instruments
of varying maturities, which may be represented by forwards
or derivatives such as options, futures contracts, or swap
agreements. It invests primarily in investment-grade debt
securities, but may invest up to 10% of its total assets in
high yield securities ("junk bonds") rated B or higher by
Moody's, or equivalently rated by S&P or Fitch, or, if unrated,
determined by PIMCO to be of comparable quality.

**drewc** · 01-26-2014, 02:36 PM

What is your investment horizon? The stable value fund will provide very low returns.

thoughts on a "Stable Value" fund