Mitch:Thanks for the reply Taylor ! Much appreciated.
Admitedly I'm a newbie investor trying to get my head around things. I totally understand the concept of diversification in the AA strategy. I guess I'm not understanding the 'safety' or 'ballast' aspect as you cite. By safety, are you referring to the fact that my FI portion of my AA (let's assume 50% FI), will not LOSE money as that 40-50% is diverted away from (not allocated to) falling equity markets ? If so, it seems to me I'd rather have it in my stable value fund earning less than inflation rather than earing nothing or perhaps losing ?
By "safety" I am referring to the fact that you are unlikely to lose much money in good quality short- or intermediate-term bond funds. Total Bond Market's worst annual decline was -3%. You should expect to see the stock part of your portfolio decline -50% or more.
I see nothing wrong with using a stable value fund in a good company for portfolio "safety." In return for the increased safety of the stable value fund, you lose the opportunity for a larger gain and you may lose liquidity. Not a big decision either way.
The important decision is your portfolio's stock/fixed-income ratio. More than anything else, this asset-allocation decision determines the expected risk and expected return of your portfolio.