You may have noticed an option in your 401(k) plan, called a Stable Value Fund, but never really gave it serious consideration. Now may be a good time to give it a closer look.
Stable Value Funds are similar to Money Market Funds but often provide higher returns. They are also good alternatives to bond mutual funds because of their stable returns in various economic environments. For example, bond mutual funds can lose principle when interest rates are rising (and bond prices are falling) whereas the returns for Stable Value Funds can remain stable or even increase in rising interest rate environment.
As I write this, chances for continued slow and steady growth appear just as likely as another recessionary period; you may as well toss a coin to guess the direction of the economy in the short-term. Money market rates are close to Zero and bond fund prices will fall if and when interest rates start going up.
If you have a Stable Value Fund option in your employer's retirement plan, it can provide a good alternative or addition to the fixed income portion of your retirement savings portfolio.