SO your investment portfolio is still shrinking, and you’re wondering if there’s anything you can do to save the money you have left.
The answer is yes: You can put your assets into a stable value fund, which guarantees no loss of principal. The fund managers take out insurance so that they can promise to at least return the original investment when the money is withdrawn.
The downside is that such funds do not guarantee growth of principal.
Nevertheless, stable value funds have gotten very popular after the market’s sell-off of the last 18 months.
Stable value investments are fixed-income vehicles that maintain the value of principal and accumulated interest. Financial advisers say stable value funds protect principal and lock in gains, while offering bondlike returns with the low volatility of cash.
“Stable value investments can’t compete with flashy equities when stocks are flying high,” said Aruna Hobbs, director of business development and head of the stable value fund group for Aegon Institutional Markets, the biggest provider of such funds.
“During a downturn, people who have a portion of their assets invested in stable value funds benefit from lower volatility and greater capital preservation,” Hobbs added.
The assets in stable value funds increased 57.2 percent in the first four months of this year, according to the Hewitt 401(k) Index, which tracks the investment activity of the nearly 1.5 million U.S. employees with 401(k) plans. More than $250 billion is now invested in stable value funds.
As investors near retirement or college tuition payment dates, advisers say, stable value funds offer greater safety than stocks or bonds because they are insulated against steep market declines.
Stable value funds are included in about two-thirds of the nation’s 401(k) plans, though a handful are also available outside of such plans. They are Deutsche Preservation Plus Income fund, a no-load with a year-to-date gain of 3.74 percent; UAM IRA Capital Preservation fund, also a no-load with a gain of 3.75 percent; and Oppenheimer Capital Preservation fund, which has a gain of 3.89 percent but is available only in 401(k) plans.
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SAFETY IN STABLES
Fund // Portfolio manager // YTD gain // 2000 gain // Load // Assets
Deutsche Preservation Plus Income // Eric Kirsch // 3.74% // 6.7% // None // $3M
UAM IRA Capital Preservation // Andrew Beaumier // 3.76% // 6.8% // None // $37M
Oppenheimer Capital Preservation // Jane Putnam // 3.89% // 6.2% // 3.5%* // $46M
*Available only in 401(k) plans, where fee is usually waived
Source: Post research