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Old 01-05-2015, 10:48 AM   #21
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I think you did a wise move not a stupid one. Like you said you will pay lower expenses now. You might consider Wellesley for your more conservative money. It will likely provide you much better returns and still be quite stable.
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Old 01-07-2015, 08:53 AM   #22
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Sorry to highjack the thread but I had a question about stable value funds.

My 401k offers a stable value fund with a 3% fixed rate of return. Would this be a suitable alternative to holding bonds considering interest rates are so low?
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Old 01-07-2015, 09:12 AM   #23
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Quote:
Originally Posted by jags86 View Post
Sorry to highjack the thread but I had a question about stable value funds.

My 401k offers a stable value fund with a 3% fixed rate of return. Would this be a suitable alternative to holding bonds considering interest rates are so low?
Read the whole thread. Stable value funds are pretty well discussed.

My suggestion is to look very carefully how the "stable" value fund is guaranteed and what the credit rating is for them. These are not FDIC insured and are typically not diversified. The "guarantor" is usually an insurance company. Find out if you have any limitations to move money in or out of the fund.
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Old 01-07-2015, 10:17 AM   #24
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Quote:
Originally Posted by jags86 View Post
Sorry to highjack the thread but I had a question about stable value funds.

My 401k offers a stable value fund with a 3% fixed rate of return. Would this be a suitable alternative to holding bonds considering interest rates are so low?
Generally, yes and many posters here are using stable value funds as all or part of their bond allocation to mitigate interest rate risk. As 2B wrote, there are a few rare cases over the last 20 years of companies that went bankrupt that the loss in principal was caused by the employer's bankruptcy and the insurer was not obligated to pay under their contract with the plan... Lehman Bros and Chrysler were named in a link earlier in this thread, but in those cases the loss to the participants were relatively small (1-3% IIRC), so there is a small amount of credit risk.
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