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GIC - Stable Value fund
Old 02-19-2006, 09:12 AM   #1
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GIC - Stable Value fund

Where does a "Stable Value Income fund" or Guaranteed Income Contract (GIC) belong in an asset allocation? Presume it would take the place of some /all of the bond holdings. We just recently were given this option in our 401K.

Has anyone used them?

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Re: GIC - Stable Value fund
Old 02-19-2006, 01:02 PM   #2
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Re: GIC - Stable Value fund

Its basically a high yielding money market fund only available in qualified plans. Not a bad choice for MM/bond allocation.

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Re: GIC - Stable Value fund
Old 02-19-2006, 02:23 PM   #3
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Re: GIC - Stable Value fund

I have a portion of my 401(k) in a GIC and I classify it as cash when analyzing my overall portfolio. Unlike bonds the capital is protected so it really behaves much like a MM fund.
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Re: GIC - Stable Value fund
Old 02-19-2006, 03:00 PM   #4
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Re: GIC - Stable Value fund

I have most of my 401k in something they call the "Fixed Fund".
Used to be called GIC, the G standing for Guaranteed.
But since it's not really guaranteed, the name was changed after the
insurance industry debacle of some odd years ago.
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Re: GIC - Stable Value fund
Old 02-19-2006, 07:14 PM   #5
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Re: GIC - Stable Value fund

I've got a "stable value fund" in my 401(k). Luckily, there is a breakdown of its investments. GIC's from over 20 insurance companies. I'd definitely make sure that the contracts are spread over a number of insurers and they are highly rated.

GIC's and stable value funds could probably substitute for a nominal bond allocation, but IMO aren't a good substitute for TIPS.

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Re: GIC - Stable Value fund
Old 02-19-2006, 09:30 PM   #6
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Re: GIC - Stable Value fund

In The Federal Govt TSP retirement plan there is a G Fund which only holds short term (overnight) Govt bonds, it cannot lose money. I have come to appreciate this fund more as I learn more about financial issues. This fund sounds a lot like a stable value fund functionally. As I understand this fund it really helps your portfolio reduce volitility. So if you had selected an AA of 70% equities/30% bonds then you might be able to go say 80% or 90% equities and 20% 0r 10% G/stable value fund as over time the return would be better at the same level of volitility/risk.

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