Stable value investments are fixed income investment vehicles offered through defined contribution savings accounts and now some mutual funds and IRAs. The assets in stable value funds are high quality bonds and interest-bearing contracts, purchased directly from banks, insurance companies or mutual funds, that guarantee to maintain the value of the principal and all accumulated interest.

Stable value investments provide consistent, predictable growth over the long term. They are ideal for investors seeking low volatility and stable returns.

Stable value investors receive interest income comparable to that earned on an intermediate investment grade corporate bond fund, but with less market risk.

In comparison to money market funds, stable value investments have equal liquidity and stability, but significantly higher average interest rates.

In general, stable value investments have no withdrawal restrictions. However, since they are purchased within retirement plans, the plan itself may have withdrawal restrictions. Barring such restrictions, stable value investors have access to their accounts at full value for withdrawals and transfers without penalty. Unlike a certificate of deposit, it is not necessary to wait until maturity to avoid an interest penalty on withdrawals.

Stable value investments are available through defined contribution savings, profit sharing plans, and now some IRAs and mutual funds. However, not all plans or mutual fund companies offer them.

Stable value investments are included in almost two-thirds of all defined contribution savings and profit sharing plans.

Over time, stock funds will produce a higher return than stable value funds. However, the unique risk/return characteristics of stable value investments make them an excellent choice for anyone who wants to protect assets and balance portfolio risk.

Since stable value is not subject to market risk, it is an excellent choice for those wishing to diversify a stock portfolio. Substituting stable value for an actively managed bond portfolio will allow an investor to increase their allocation to equities without increasing the risk of their overall investment portfolio. Also, because stable value can be withdrawn without penalty, it is ideal for those wanting to keep a portion of their funds liquid, whether for emergency use, financing a home purchase, or funding a college education.

A Guaranteed Investment Contract is an example of an investment purchased as an asset of a stable value fund.

A broad array of fixed income investments are used in stable value funds to prudently diversify the fund, reduce risk and volatility, and to achieve appropriate investment returns. Stable value investments are typically purchased from financial institutions such as insurance companies, banks, investment management firms or mutual funds. Stable value funds promise to pay investors a predictable return or yield, and preserve investment principal and accumulated interest earnings for the life of the investment. A GIC, for example, is one type of investment that can be held in a stable value fund.

Stable value investments are backed by the financial strength of the issuing financial institution and the underlying assets.