Lux Investing
Is it basically safe to use a Stable Value fund in my 401(k) as a substitute for a money market fund?
Ignore for a moment that this is a retirement account (401k). I want to be very conservative with my balance but do not want to withdraw. About 15 fund choices, including s&p 500 index fund and a basic bond fund. Also a Stable Value Fund. Am currently using Stable Value fund since we don't have a money market type fund. I know Stable Value is invested in GICs etc and not treasuries, and that share price of $1 is not guaranteed. But given the limited options of funds, if I'm looking to mimic a money market, is the Stable Value the best choice? Or should I be in a bond fund? Or is diversified between bond and stock index funds going to be the best way to maintain very stable balance? Thanks.
Public Comments
- The stable value fund should be safe and will give you a much more stable balance than stocks and bonds. However, you don't really need a stable balance. You need a growing balance. Putting most or all of your money in a stable value fund will not grow your money. Depending on the interest rate and the current rate of inflation, this can actually cause you to lose money as measured in purchasing power. Inflation is your greatest enemy, not volatility. If you can't bring yourself to put your money in stocks and bonds, put at least some of it in stocks and bonds. Otherwise, you may find that you can't afford to retire when the time comes.
- Why would you assume more risk to mimic the money market? Why not just put your funds into the money market and remove the risk of loss? Stable Value funds can lose principle. Thos GIC's, etc have some level of risk to them. So, if you are looking to be very conservative, use the MM.
