Can I use VAIPX as a money-market type of investment in my 401k

[dvalley]

VAIPX - Vanguard Inflation-Protected Securities Fund Admiral Shares. I'm not seeing any other options that will allow me to more or less park my money in the 401k. I'm doing a full year's worth of 401k investment now and with the market this high I'd rather wait until next year to DCA it. Of all the fund options I have in the 401K VAIPX is the only one I see as somewhat safe? Any thoughts?

 

[coveredbridge]

I would not consider that to be a money market substitute. with a durAtion of 8 years I would consider that at the long end of the intermediate bond fund range

 

[audreyh1]

Long bonds - could really be hurt by rising interest rates.

 

[dvalley]

I'll be 55 in 13 yrs so I have some time. However, bonds hurting was my concern too, I just thought with VAIPX at least my principal will be inflation protected in case the market tanks in the short-term at which point I'd transfer funds from VAIPX to the S&P500 inxed fund.

 

[LOL!]

My answer would be a resounding NO!

VAIPX is an intermediate to long-term bond fund that will drop in value if interest rates go up. You can chart this yourself. You can see from morningstar.com that it has lost over 2% in the past 3 months.

You can list ALL your 401(k) options and we can probably spot a more suitable fund, but it would probably be better to contact your 401(k) provider and ask them. It would be very highly unusual to not offer something that would not lose value ever (but also would not gain value either).

 

[dvalley]

Thanks LOL! I too am surprised there are no options to just park the funds somewhere. Attached is a screen shot of what's available.

 

[fosterscik]

Your Met Life stable value fund is the best place if you just want to park cash.

 

[dvalley]

What makes MetLife better than VAIPX? I ask because Metlife has a higher expense ratio .70% vs .10% for VAIPX and they both seem to be treasury bond focused.

 

[RE2Boys]

What makes MetLife better than VAIPX? I ask because Metlife has a higher expense ratio .70% vs .10% for VAIPX and they both seem to be treasury bond focused.

Because under the terms of the Met Life insurance contract, your investment won't go down in value if interest rates go up.

 

[pb4uski]

Exactly.... the stable value fund is like a fixed interest account.

 

[LOL!]

That stable value fund is probably the one to use, but please be aware of a couple of things that may (or may not) apply to your 401(k):

1. Often stable value funds have frequent trading restrictions, so they are not meant to go-into and get-out-of frequently. Check the rules for your fund.

2. The expense ratio is somewhat meaningless because the "yield" is after the expenses are paid. Sure, one would like a lower e.r. because then the yield would be higher. What is the reported yield for this fund?

 

[dvalley]

Thanks guys! Looks like that's what I need, I'll start the fund transfer tomorrow. Here's all the info they provide on it:
https://dcportal.putnam.com/mstar_docs/F00000M7TJ.pdf

 

[ziggy29]

Bond funds as cash? Nope. An ultrashort, high-quality bond fund if there are no other cash-like funds available -- maybe. This? No. As others have said, the stable value fund is probably the only thing close to a cash equivalent here.

 

[target2019]

If you're close to getting out, then SV makes sense, to me.
But if you'll be there a few years, you could build things out right now to meet your asset allocation?

 

[dvalley]

Thanks all- I picked the SV fund today.