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Financial Professional
Prudential Advisors
1060 Broadway #1160
Albany, NY 12204
Phone: 800-243-5334
Fax: 800-720-0780
Email: sales@ltmclientmarketing.com
Website: letstalkfinancialwellness.com
July/August 2023
Stable Value Funds: A Layer of Protection
Stable value funds* contain a diversified portfolio of fixed-income securities designed to help reduce overall portfolio risk while earning returns that mirror those of an intermediate-term bond fund. Stable value funds offer minimal volatility and low correlation to other asset classes.
The Benefits
Stable value funds typically invest in high-quality short-term and intermediate-term government and corporate bonds. Investors receive specified interest payments. Although bonds in the fund won’t increase dramatically in value over time, the expectation is that they won’t lose principal.Stable value funds can be used to help reduce the volatility of a portfolio. They represent a possible alternative to lower yielding investments, such as money market funds, since stable value funds tend to offer higher returns.
Two Components
Stable value funds are composed of two parts: bonds and insurance contracts issued by insurance companies and banks. The insurance component offers the potential that the value of the fund won’t decline, no matter what interest rates are doing. Funds may spread insurance contracts among multiple insurers or banks to add diversification.Four Types
- Individually managed accounts are offered by an investment manager and managed for a specific plan’s participants.
- Pooled funds are offered by an investment manager and combine the assets of unaffiliated plans into one fund.
- General account products are guaranteed by a single insurance company and backed by their general fund.
- Separate account products are offered and guaranteed by a single insurance company from a separate account. Each insurance company has its own fees, charges and limitations so refer to their prospectus.
The Downsides
Funds may come with extra management costs and fees, potentially reducing yields. Funds generally are available only to participants in certain 401(k) and other defined contribution retirement plans. Some college savings plans may also offer stable value funds as an option. If you’re thinking of rolling over a 401(k) to an individual retirement account (IRA) in the future, you won’t find a stable value fund offered by a brokerage.Stable value funds in your 401(k) plan may have names such as principal preservation, capital accumulation, or guaranteed income funds. Talk to your financial professional before you invest.
*A stable value investment is neither insured nor guaranteed by the U.S. government. There is no assurance that the investment will be able to maintain a stable net asset value, and it is possible to lose money in such an investment. All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.
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Securities offered through LPL Enterprise (LPLE), Member FINRA/SIPC, and an affiliate of LPL Financial. “Prudential Advisors” is a brand name for the proprietary retail sales channel of The Prudential Insurance Company of America (“PICA”) and its insurance company and other affiliates (collectively “Prudential”). Prudential Advisors financial professionals are licensed insurance agents of Prudential. Pursuant to a strategic relationship among Prudential, LPLE, and LPL Financial, Prudential Advisors financial professionals provide securities brokerage services through LPLE, an affiliate of LPL Financial. These financial professionals are permitted to brand under “Prudential Advisors.” LPLE and LPL Financial are not affiliated with Prudential.
This newsletter is general educational information provided by a Prudential Financial Professional and is not intended to market or sell any specific products and services, but rather provide general information about the subject matter covered only. Prudential Advisors and LTM Marketing Solutions, LLC are unrelated companies. This publication was prepared for the publication’s provider by LTM Marketing Solutions, LLC, an unrelated third party. Articles are not written or produced by the named representative.
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