Demystifying stable value
Get a better understanding of stable value investments to see if they’re a good fit for your clients’ retirement plans.
Stable value basics
A stable value fund is a relatively low-risk investment option that focuses on providing:
- Capital preservation
- Reliable, positive returns
- Stability and low volatility
Every stable value investment is backed by an investment contract issued by an insurance company or bank, which typically guarantees that participants receive at least the value of their principal plus any accumulated interest.
Stable value funds may be ideal for participants who:
- Seek current income with steady returns
- Possess a shorter investment time frame
- Want to diversify a high-risk, aggressive investment portfolio
- Hope to avoid the relative unpredictability of the stock market or global economic conditions
Understanding stable value terms
The terminology associated with stable value investments can be nuanced and challenging for advisors, including those with decades of experience. Here are a few commonly used words defined:
- Crediting rate: Often referred to as the effective annual yield, this is the interest rate applied to the book value of a stable value investment contract. It can be expressed either as a net or gross crediting rate, and can be fixed for the entire contract term or adjusted at defined points during the contract.
- Interest rate floor: Also known as the guaranteed minimum interest rate (GMIR), this refers to the lowest rate participants will receive from their stable value accounts.
- Portability: Most guaranteed insurance stable value accounts are fully portable, which means a new recordkeeper can continue to offer them as an investment option.
A sound, conservative investment option
With its built-in stability, yield and liquidity, a stable value investment can be ideal for any defined contribution retirement plan looking for a sound, conservative investment option.
Our white paper covers stable value basics, explains the growth of this option’s popularity, clarifies common terminology, compares stable value with money market funds, and discusses how you can achieve success in this marketplace.
To find out how Lincoln Stable Value solutions can help you support positive retirement outcomes, call our Sales Desk at 855-533-2170.