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Anthony J. Bardi
Registered Representative
Enrolled Agent, LTC# 454
Tax and Financial Solutions, Inc.
151 SE 223rd Avenue
Gresham, OR 97030
Phone: 503-666-7909
July/August 2023
A Layer of Protection
Stable value funds* contain a diversified portfolio of fixed-income securities designed to help reduce overall portfolio risk while earning returns that mirror those of an intermediate-term bond fund. They offer minimal volatility and low correlation to other asset classes.
The Benefits
Stable value funds typically invest in high-quality short-term and intermediate-term government and corporate bonds. Investors receive specified interest payments. Although the bonds in the fund probably won't increase dramatically over time, the expectation is that they won't lose principal.Stable value funds can be used to help reduce the volatility of a portfolio. They represent a possible alternative to lower yielding investments, such as money market funds since stable value funds tend to offer higher returns.
Two Components
Stable value funds are composed of two parts: bonds and insurance contracts issued by insurance companies and banks. The insurance component offers the potential that the value of the fund won't decline, no matter what interest rates are doing. Funds may spread insurance contracts among multiple insurers or banks to add diversification.Four Types
There are four types of stable value funds.- Individually managed accounts are offered by an investment manager and managed for a specific plan's participants.
- Pooled funds are offered by an investment manager and combine the assets of unaffiliated plans into one fund.
- General account products are guaranteed by a single insurance company and backed by their general fund.
- Separate account products are offered and guaranteed by a single insurance company from a separate account.
The Downsides
Funds may come with extra management costs and fees, reducing yields. They generally are available only to participants in certain 401(k) and other defined contribution retirement plans. Some college savings plans may also offer stable value funds as an option.Stable value funds in your 401(k) plan may have names such as principal preservation, capital accumulation, or guaranteed income funds. Talk to your financial professional before you invest.
*A stable value investment is neither insured nor guaranteed by the U.S. government. Diversification does not ensure a profit or protect against a loss.
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Tax and Financial Solutions, Inc. and LTM Client Marketing are unrelated companies. This newsletter was created by LTM Client Marketing and was not written or created by the named financial professional and does not necessarily represent the views and opinions of Avantax Wealth Management® or its subsidiaries.
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