How Stable Value Funds Fit in Your Portfolio

If you have access to these fixed-income investments, they are a good place to keep money you might withdraw soon in retirement.

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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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Kimberly Lankford
Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.