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What is a stable value fund?

Stable value fund

It’s a type of low-risk investment, hence the name ‘stable’. Stable value funds invest in fixed-income products and enter into contracts with banks or insurance companies that are specifically designed to offer rate protection. The returns can be small compared with other investments though.

Where have you heard about stable value funds?

They're often part of company retirement plans in the US. They’re popular with people nearing the end of their working life because they continue to receive the set interest rate and full principal payment regardless of what the stock or bond markets are doing.

What you need to know about stable value funds.

Stable value funds closely resemble traditional bond funds, but take extra measures to protect investors from interest rate fluctuations that often cause normal bond funds to experience dramatic swings in price.

If there's a recession or volatility in the stock market, this type of fund can be one of the most valuable investments. While returns are much lower with other investments in times of economic hardship, stable value funds remain steady.

That’s not to say they're entirely foolproof. Defaults in the underlying bonds or unexpected corporate events such as huge lay-offs can affect their value.

Find out more about stable value funds.

Read our definition of money market fund for an insight into a similar type of investment product.

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