Definition: Commonly offered in 401(k) plans and other employer-sponsored retirement plans, Stable Value Funds are investment choices providing a fixed income alternative to money market funds and bond mutual funds. Stable Value Funds seek safety and principle (stability) primarily through investing in bonds backed by insurance for stability and in instruments called synthetic Guaranteed Investment Contracts (GICs).
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.
According to StableValue.org Stable Value Funds, as of March 2012, had $540 billion invested and were offered in 107,000 defined contribution employee benefit plans, such as 401(k) and Profit Sharing Plans. This represents nearly half of all defined contribution plans.
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