Stable Value Fund or Bond Fund

[ripper1]

Hello All. It's been awhile since I have been on here with this distinguished panel. Anyway I have reached my rebalancing band and not sure what to do. I have 95% of my fixed side of my portfolio in a Stable Value Fund and Pen Fed 5yr CD's. I am thinking about dipping back into a bond fund I once held in my 457 account. It is DODIX (Dodge and Cox Income Fund). Both Stable and Pen Fed is earning 3%. I know we are in a raising rate environment but at a snails pace. Or should I just stay the status quo.

 

[audreyh1]

Riskless 3% is still very hard to beat. When DODIX yield exceeds that by a very comfortable margin, then maybe consider gradually moving over. I don't see the point of taking on the risk otherwise. DODIX is not a conservative bond fund.

 

[brewer12345]

Stable value hands down.

 

[Trooper]

What brewer said ^. I believe I heard that stable value funds were the only asset class that did not produce negative returns in the 2007-8 financial crisis. I am guessing you are holding them in some sort of employer-sponsored retirement account -- that's the only way that I have heard to invest in them.

VBTLX has returned 2.95% YTD, but that fund isn't riskless either.

 

[pb4uski]

+2 3% in a stable value fund is a valuable opportunity.... I wish I had access to that.

 

[nun]

3% is a great rate. I have two years of spending in a stable value fund in my 457 and it's only paying 2%. However, my stand out fixed income has been TIAA-Traditional that will return 4.3% this year

 

[DrRoy]

Riskless 3% is still very hard to beat. When DODIX yield exceeds that by a very comfortable margin, then maybe consider gradually moving over. I don't see the point of taking on the risk otherwise. DODIX is not a conservative bond fund.

+1

 

[audreyh1]

What brewer said ^. I believe I heard that stable value funds were the only asset class that did not produce negative returns in the 2007-8 financial crisis. I am guessing you are holding them in some sort of employer-sponsored retirement account -- that's the only way that I have heard to invest in them.

VBTLX has returned 2.95% YTD, but that fund isn't riskless either.

cash
US treasuries
and a few high quality core bonds

did not see a negative 2007-2008

 

[candrew]

DW is invested in a stable value fund through her previous employer that yields 3.5%. Pretty sweet deal.

 

[jollystomper]

I also agree with the Stable Value Fund. the one in my Megacorp 401K pays 3% as well.

Interestingly, whenever I run the "we have recommendations" function Megacorp provides, it wants me to split my bond allocation between that fund and another bond fund that is only paying around 2.75% and is not guaranteed... I cannot figure out why it would do that (unless fees are higher on the bond fund...).

 

[jazz4cash]

My SV fund is only 1.8%. I'm jealous of you folks that are getting 3%!

Edit: I moved my fixed allocation to credit union CD's when the SV rate started dropping, but I'll keep this 401k open just for access to this fund anyway.

 

[garyt]

My SV fund is only 1.8%. I'm jealous of you folks that are getting 3%!

Edit: I moved my fixed allocation to credit union CD's when the SV rate started dropping, but I'll keep this 401k open just for access to this fund anyway.

Me too, I'm in Morley Stable Value and it's up 1.95% so far this year.

 

[43210]

I've realized that 90% Stock when I want to retire soon is a little too high, so I'm looking at Fixed Income. I don't want to sell any stock, but will direct all new contributions to Fixed Income. My 457 has a Stable Value Fund that gets 2.3% which is borderline, since total bond funds now have SEC yield nearing 2.5% (but more risk). I can use TIAA-CREF for my 403b (my 403b is elsewhere now) and they have their (liquid) Traditional fund that gets 3.25%. I'm tempted to use that, though it's a hassle, especially moving funds between 403b providers. I've been hoping bond yields would go up more before I start pouring funds into them to take some risk off the table.

 

[flyingaway]

My wife's 401k has a stable value fund with interest of 1.7% and high expense ratio.

 

[brewer12345]

My wife's 401k has a stable value fund with interest of 1.7% and high expense ratio.

Expense ratios on stable value funds are meaningless. Just look at the yield.

 

[pb4uski]

I've realized that 90% Stock when I want to retire soon is a little too high, so I'm looking at Fixed Income. I don't want to sell any stock, but will direct all new contributions to Fixed Income. My 457 has a Stable Value Fund that gets 2.3% which is borderline, since total bond funds now have SEC yield nearing 2.5% (but more risk). I can use TIAA-CREF for my 403b (my 403b is elsewhere now) and they have their (liquid) Traditional fund that gets 3.25%. I'm tempted to use that, though it's a hassle, especially moving funds between 403b providers. I've been hoping bond yields would go up more before I start pouring funds into them to take some risk off the table.

I would gladly accept the hassle of moving funds beween providers to get 3.25% fixed with no interest rate risk and negligible credit risk.

Pigs get fat.....

 

[43210]

I would gladly accept the hassle of moving funds beween providers to get 3.25% fixed with no interest rate risk and negligible credit risk.

Pigs get fat.....

Such moves are risky, and there's a risk of losing thousands of dollars, due to delays, incompetence and market movements.

 

[audreyh1]

Such moves are risky, and there's a risk of losing thousands of dollars, due to delays, incompetence and market movements.

Not so much from one stable value to another. Yes, there could be a delay impacting interest earned.

 

[43210]

If you transfer funds from one custodian to another, there are huge risks. They can liquidate all your stock, and the funds can stay in limbo for weeks or months while the market runs up, and you miss the gains. You can lose thousands of dollars with no recourse.

 

[pb4uski]

Just because you keep posting it doesn't make it true.... I've done at least 3 transfers over the past 6 years with no problems at all. You'll always have some timing risk if the market rises while your transaction is processing.... that is just part of the process. IIRC in my cases the total time as a week or so.