Stable value fund or TBM+stable value fund?

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markcoop
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Stable value fund or TBM+stable value fund?

Post by markcoop »

I have always been a fan of taking risk on the equity side. As such, a very large part of my fixed income has been invested in my company’s stable value fund in my 401K. I believe it is a pretty good safe fund. Some returns:
10 yrs: 2.98%
5 yrs: 2.91%
1 yr: 2.45%
From the fund literature:
“The fund may invest in wrapped bonds, a limited amount of unwrapped bonds and cash. For the wrapped bonds, the fund invests in insurance contracts (“wrap contracts”) which allow the portfolio to earn a specified rate of interest that may be more or less than the actual income earned by the fixed income securities.”

Average Credit Quality: Aa3

The 401K has a Total Bond Market fund with an .03% ER. Although the stable value fund has done what I expected, the returns seem a bit low. I understand that is directly related to having higher credit quality bonds. I was thinking that perhaps it would make sense to include some TBM in this mix. Was thinking a 50/50 split would be appropriate. As the balance of my fixed income has grown over the years, I feel uncomfortable with it now being the largest asset I own. Thoughts on whether this is a good move? Trying to understand what this really buys me as far as an affect on my total portfolio (perhaps a bit more return for a bit more risk with more diversification).
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Re: Stable value fund or TBM+stable value fund?

Post by retired@50 »

markcoop wrote: Tue Jul 20, 2021 10:05 am Trying to understand what this really buys me as far as an affect on my total portfolio (perhaps a bit more return for a bit more risk with more diversification).
The questions I'd be asking are...

What is the current guaranteed rate of return on the stable value fund?

What are the withdrawal restrictions, if any, on the stable value fund?
Sometimes these funds only allow 20% per year withdrawal, or something along those lines, so it could take you 5 years to get your money out.

Once you have the rate of return on the stable value fund, and the restrictions, you can compare to the current yield on the total bond fund.
It also depends on how you feel about seeing the value of these holdings drop (potentially). Total bond won't be as steady as the stable value fund.

Regards,
This is one person's opinion. Nothing more.
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Re: Stable value fund or TBM+stable value fund?

Post by Stinky »

I like the returns that your SV fund have generated.

What is the current rate? And, and retired@50 asked, are there any withdrawal restrictions.

Presuming that the current rate is over 2% (likely) and the withdrawal restrictions are few or none, I’d feel comfortable having a significant part of my fixed income allocation in the SV fund.
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markcoop
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

I don't believe there are any major withdrawal restrictions. I have searched quite a bit and the only restriction I see is related to not being able to make a direct exchange to a competing fund, which I don't believe TBM to be.

As for the current rate, the only rate I see is a YTD (Daily) rate of 1.24%.
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Re: Stable value fund or TBM+stable value fund?

Post by Stinky »

markcoop wrote: Tue Jul 20, 2021 10:55 am I don't believe there are any major withdrawal restrictions. I have searched quite a bit and the only restriction I see is related to not being able to make a direct exchange to a competing fund, which I don't believe TBM to be.

As for the current rate, the only rate I see is a YTD (Daily) rate of 1.24%.
Typically, a money market fund is a competing fund. But you should check about TBM. Often, the “restriction” will be that you need to move into equities for a while until you can move into competing fund.

A 1.24% return YTD implies a rate well over 2%.
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

Thanks. I am comfortable with the stable value fund. The question, however, that I am pondering is whether it would be worthwhile to diversify beyond the stable value and add TBM or perhaps even a TIPS fund (also available in my 401K with an ER 0.02%).
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Re: Stable value fund or TBM+stable value fund?

Post by student »

I also like stable value fund as my "bond" portion is almost exclusively TIAA Traditional. All flavors (except IRA) of TIAA Traditional have an annual average return of 3%+ over the past 10 years, which is comparable to TBM. I think a good stable value fund should have return at least just under the performance of TBM, the potential slight under performance is the cost of smoothing out the bond curve.

In terms of whether you should diversify into TBM, I think it depends on whether you are locked into your stable value fund. Since you said there are no stringent restrictions in moving the money, I don't think it is necessary for diversification. To me, the question is whether you are willing to "pay" a bit, if you stick with stable value fund exclusively, for a smoother ride.
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Re: Stable value fund or TBM+stable value fund?

Post by dbr »

You are not going to somehow become signficantly wealthier by "diversifying" stable value to TBM or TIPS. You don't say what fraction of your assets are in bonds. I would not put all of a large portfolio that is more bonds than stocks into a single SV fund. I would not hesitate to just keep all of a 20% bond allocation in the SV fund. I have practiced both of these don't do this, do that over the years.
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

student wrote: Tue Jul 20, 2021 12:57 pm To me, the question is whether you are willing to "pay" a bit, if you stick with stable value fund exclusively, for a smoother ride.
I guess I'm starting to think it is not worth it to pay for a 100% smooth right. A 50/50 allocation between TBM and SV will be pretty smooth.
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

dbr wrote: Tue Jul 20, 2021 1:32 pm You don't say what fraction of your assets are in bonds. I would not put all of a large portfolio that is more bonds than stocks into a single SV fund.
My AA has slowly become more conservative. It is at 50% bonds right now with most of it in the stable value fund. The large balance in the stable value fund, currently the largest of any asset I own, is what got me thinking to diversify it.
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Re: Stable value fund or TBM+stable value fund?

Post by alex_686 »

markcoop wrote: Tue Jul 20, 2021 10:05 am The 401K has a Total Bond Market fund with an .03% ER. Although the stable value fund has done what I expected, the returns seem a bit low. I understand that is directly related to having higher credit quality bonds.
A couple of points.

You want to focus on the character of the investment and how it fits in with your goals. A stable value fund targets a specific return. Such as 10 year treasury yield so something like that. A total bond fund is a generic bond fund. I can make a solid case for owning "the market" with equities. It is a harder argument with bonds.

I would focus on yield and risk. I would ignore ER and credit ratings.

You shouldn't care about ER, you should care about yield. Yes, ER tends to be a drag on returns. But you don't care about returns, you care about returns. Don't put the cart in front of the horse. Also, They are different products, so they are going to have different costs. Also, stable value funds are a insurance product, not a fund. As such the accounting of expenses are different. A expense of a stable value fund might be treated as a asset in a mutual fund.

I would check the credit ratting again. Normally the credit ratting given is on the stable value fund, which is a insurance contract. So you really care about the credit worthiness of the insurance company, not of its underlying assets. Well, you kind of need to be worried about both. 70% for the insurance company, 30% for the fund. The only way that the underlying assets count is if the insurance company can't make its obligations. Then the fund has to support itself.
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markcoop
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

alex_686 wrote: Tue Jul 20, 2021 2:08 pm
markcoop wrote: Tue Jul 20, 2021 10:05 am The 401K has a Total Bond Market fund with an .03% ER. Although the stable value fund has done what I expected, the returns seem a bit low. I understand that is directly related to having higher credit quality bonds.
A couple of points.

You want to focus on the character of the investment and how it fits in with your goals. A stable value fund targets a specific return. Such as 10 year treasury yield so something like that. A total bond fund is a generic bond fund. I can make a solid case for owning "the market" with equities. It is a harder argument with bonds.

I would focus on yield and risk. I would ignore ER and credit ratings.

You shouldn't care about ER, you should care about yield. Yes, ER tends to be a drag on returns. But you don't care about returns, you care about returns. Don't put the cart in front of the horse. Also, They are different products, so they are going to have different costs. Also, stable value funds are a insurance product, not a fund. As such the accounting of expenses are different. A expense of a stable value fund might be treated as a asset in a mutual fund.

I would check the credit ratting again. Normally the credit ratting given is on the stable value fund, which is a insurance contract. So you really care about the credit worthiness of the insurance company, not of its underlying assets. Well, you kind of need to be worried about both. 70% for the insurance company, 30% for the fund. The only way that the underlying assets count is if the insurance company can't make its obligations. Then the fund has to support itself.
Thanks. That makes sense.

Here is a breakdown of the credit ratings of the wrap contract issuers:
Mass Mutual (Aa3) 13.0%
New York Life (Aaa) 9.4%
State street Bank (Aa3) 13.3%
Met Life (Aa3) 16.6%
Prudential Insurance Co (Aa3) 23.0%
Royal Bank of Canada (A2) 20.6%
VOYA Retirement Insurance (A2) 4.1%

Avg credit quality: Aa3
Blended yield: 2.41%

Don't see the credit ratings of the underlying assets.

Another reason I thought to diversify with the TBM is the stable value fund is a bit of a mystery to me. I get the idea of it, but a TBM seems alot more transparent.
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Re: Stable value fund or TBM+stable value fund?

Post by MrJedi »

Sometimes the current rate is buried in other places. For example my current 401k SV rate is buried as a note under the performance summary in my plan information area. Not as an attachment but just as a written note on the page. This information is not found when I simply click the fund for information when I am browsing the funds. Mine updates quarterly.
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

I just took a look at the bond funds available. I see two decent options:

1) Vanguard Intermediate-Term Bond Index Fund Institutional - ER = 0.05%

2) Neuberger Berman Total Bond Market - ER = 0.03%

Any thoughts as which may be better to diversify with my stable value fund?
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Re: Stable value fund or TBM+stable value fund?

Post by retiredjg »

If you have a preference for index funds over actively managed funds, you might be sure that Neuberger fund is an index. The ER sort of hints that it is, but....

Edited to add, I don't find a total bond fund on their site and the closest thing to (core bond) it does not have a low expense ratio.
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

retiredjg wrote: Wed Jul 21, 2021 9:27 am If you have a preference for index funds over actively managed funds, you might be sure that Neuberger fund is an index. The ER sort of hints that it is, but....

Edited to add, I don't find a total bond fund on their site and the closest thing to (core bond) it does not have a low expense ratio.
Yeah, it doesn't say index in the name but the literature says "The Total Bond Market Fund, a unitized fund, seeks to track the investment
performance of the Bloomberg Barclays U.S. Aggregate Bond Index".
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Re: Stable value fund or TBM+stable value fund?

Post by retiredjg »

markcoop wrote: Wed Jul 21, 2021 9:34 am
retiredjg wrote: Wed Jul 21, 2021 9:27 am If you have a preference for index funds over actively managed funds, you might be sure that Neuberger fund is an index. The ER sort of hints that it is, but....

Edited to add, I don't find a total bond fund on their site and the closest thing to (core bond) it does not have a low expense ratio.
Yeah, it doesn't say index in the name but the literature says "The Total Bond Market Fund, a unitized fund, seeks to track the investment
performance of the Bloomberg Barclays U.S. Aggregate Bond Index".
Unitized fund? Like maybe a CIT (collective investment trust)?

Just because a fund follows an index does not mean it is an index fund. I don't know if CITs can be actively managed or not. However, if you are absolutely positive the ER is .03% rather than .3%....it should be fine. Obviously, the Vanguard fund is fine too.
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Re: Stable value fund or TBM+stable value fund?

Post by retiredjg »

I wonder if the word "track" is important here. I wonder if that indicates an index????
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Re: Stable value fund or TBM+stable value fund?

Post by retired@50 »

markcoop wrote: Wed Jul 21, 2021 9:34 am
retiredjg wrote: Wed Jul 21, 2021 9:27 am If you have a preference for index funds over actively managed funds, you might be sure that Neuberger fund is an index. The ER sort of hints that it is, but....

Edited to add, I don't find a total bond fund on their site and the closest thing to (core bond) it does not have a low expense ratio.
Yeah, it doesn't say index in the name but the literature says "The Total Bond Market Fund, a unitized fund, seeks to track the investment
performance of the Bloomberg Barclays U.S. Aggregate Bond Index".
One way to evaluate this would be to dig up the BB US Aggregate Bond Index performance over the past several years, and then compare it to how the Neuberger fund actually performed for plan participants. The difference in performance numbers is generally called tracking error. If it's off by more than a few basis points, then I'd just use the Vanguard fund.

Regards,
Last edited by retired@50 on Wed Jul 21, 2021 10:53 am, edited 1 time in total.
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

Found this: "The fund was transitioned to passive management in the third quarter 2010."
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

I think I have two things I'm looking at here:
1) Would a TBM fund or an Intermediate-Term Bond fund better complement a stable value fund? Probably negligible either way, but interested in opinions.
2) Is the specific bond TBM fund offered a good one?
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

retired@50 wrote: Wed Jul 21, 2021 10:37 am One way to evaluate this would be to dig up the BB US Aggregate Bond Index performance over the past several years, and then compare it to how the Neuberger fund actually performed for plan participants. The difference in performance numbers is generally called tracking error. If it's off by more than a few basis points, then I'd just use the Vanguard fund.
Trailed the index by a .07% difference over the past 5 years.
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Re: Stable value fund or TBM+stable value fund?

Post by alex_686 »

retiredjg wrote: Wed Jul 21, 2021 10:26 am Just because a fund follows an index does not mean it is an index fund. I don't know if CITs can be actively managed or not. However, if you are absolutely positive the ER is .03% rather than .3%....it should be fine. Obviously, the Vanguard fund is fine too.
There are marketing regulations around this.

All funds must select a index for comparison in the marketing materials.

If a fund uses the word "index" or uses a index name, like S&P 500, it must be a index fund. This severely limits the asset choices for a portfolio manager. They are expected to cleave as closely to the index as possible.

If a fund says that it follows or tracks a index it probably is a index fund. If your are not a index fund you have to but heavy qualifiers around those magical words saying clearly that it is not a index fund.
markcoop wrote: Wed Jul 21, 2021 9:34 am Yeah, it doesn't say index in the name but the literature says "The Total Bond Market Fund, a unitized fund, seeks to track the investment
performance of the Bloomberg Barclays U.S. Aggregate Bond Index".
This is almost certainly a index fund.
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Re: Stable value fund or TBM+stable value fund?

Post by alex_686 »

markcoop wrote: Wed Jul 21, 2021 10:54 am I think I have two things I'm looking at here:
1) Would a TBM fund or an Intermediate-Term Bond fund better complement a stable value fund? Probably negligible either way, but interested in opinions.
2) Is the specific bond TBM fund offered a good one?
Well, what do you mean by complement?

First, did you every figure out what yield the stable value fund guarantees? Until we know that we are throwing darts randomly.

Second, the funds are both similar and different. Duration is a easy risk metric. Intermediate funds have a bullet intermediate duration. A total bond fund combines short, intermediate, and long term durations. So, on average, a total bond fund has a intermediate duration just like a intermediate fund, so has the same basic interest rate risk. However, that assumes that the who yield curve move parallel up or down. If the yield curve's slope changes or twists then you are going to get different results.
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Re: Stable value fund or TBM+stable value fund?

Post by retiredjg »

markcoop wrote: Wed Jul 21, 2021 10:54 am I think I have two things I'm looking at here:
1) Would a TBM fund or an Intermediate-Term Bond fund better complement a stable value fund? Probably negligible either way, but interested in opinions.
I think this is personal preference. I would prefer to have some of each. Maybe lately, all in the stable value fund, but when bonds start producing again, I would not have everything in the stable value fund.

2) Is the specific bond TBM fund offered a good one?
Presumably so. I can't see any reason not to use either of the bond funds you have.
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Re: Stable value fund or TBM+stable value fund?

Post by anoop »

markcoop wrote: Tue Jul 20, 2021 10:05 am I have always been a fan of taking risk on the equity side. As such, a very large part of my fixed income has been invested in my company’s stable value fund in my 401K. I believe it is a pretty good safe fund. Some returns:
10 yrs: 2.98%
5 yrs: 2.91%
1 yr: 2.45%
From the fund literature:
“The fund may invest in wrapped bonds, a limited amount of unwrapped bonds and cash. For the wrapped bonds, the fund invests in insurance contracts (“wrap contracts”) which allow the portfolio to earn a specified rate of interest that may be more or less than the actual income earned by the fixed income securities.”

Average Credit Quality: Aa3

The 401K has a Total Bond Market fund with an .03% ER. Although the stable value fund has done what I expected, the returns seem a bit low. I understand that is directly related to having higher credit quality bonds. I was thinking that perhaps it would make sense to include some TBM in this mix. Was thinking a 50/50 split would be appropriate. As the balance of my fixed income has grown over the years, I feel uncomfortable with it now being the largest asset I own. Thoughts on whether this is a good move? Trying to understand what this really buys me as far as an affect on my total portfolio (perhaps a bit more return for a bit more risk with more diversification).
You are lucky to have a stable value fund with such high returns. The money market fund in my 401k is currently yielding < 0.1%. Even the 30 year yield right now (1.88%) is below what your stable value fund returns, so basically if you invest in total bond market fund you are betting that rates go lower. Which they probably will, but it is a bet nevertheless.
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

alex_686 wrote: Wed Jul 21, 2021 11:21 am
markcoop wrote: Wed Jul 21, 2021 10:54 am I think I have two things I'm looking at here:
1) Would a TBM fund or an Intermediate-Term Bond fund better complement a stable value fund? Probably negligible either way, but interested in opinions.
2) Is the specific bond TBM fund offered a good one?
Well, what do you mean by complement?

First, did you every figure out what yield the stable value fund guarantees? Until we know that we are throwing darts randomly.
Complement - I feel the stable value is just that, stable. Assuming both bond funds are similar enough, there's a part of me that thinks combining the stable value fund with the bond fund that has a greater std deviation may be better. Or perhaps there are other characteristics that pair better with the stable value fund. To be honest, not really sure what I am asking specifically, which is in part why I am asking it.

Guarantee - I can't find any in the literature. Do all stable value have a guaranteed min? I have a call on Friday and will be sure to ask.

One other point I found out - In addition to the minuscule difference in ER between the 2 bond funds (.02%), the Vanguard Intermediate-Term Bond Index Fund also has an additional administrative fee. It is also very small, I estimate a couple basis points. So, nothing to move the needle much, but something.
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

retiredjg wrote: Wed Jul 21, 2021 11:54 am Maybe lately, all in the stable value fund, but when bonds start producing again, I would not have everything in the stable value fund.
Any specific metric to indicate such a point?
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Re: Stable value fund or TBM+stable value fund?

Post by dbr »

markcoop wrote: Wed Jul 21, 2021 2:20 pm
retiredjg wrote: Wed Jul 21, 2021 11:54 am Maybe lately, all in the stable value fund, but when bonds start producing again, I would not have everything in the stable value fund.
Any specific metric to indicate such a point?
Typically SV yields trail bond yields by some time. When interest rates on bonds rise to significantly exceed your SV yield you might switch. Personally myself I would not, just allocate in a reasonable way and leave it alone. Interest rates will go up and down and up more than once. Keep in mind the objective of the SV contract is to hold the NAV at a fixed point while getting better return than on cash or short bonds, while bond investments fluctuate in value.
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

dbr wrote: Wed Jul 21, 2021 2:24 pm
markcoop wrote: Wed Jul 21, 2021 2:20 pm
retiredjg wrote: Wed Jul 21, 2021 11:54 am Maybe lately, all in the stable value fund, but when bonds start producing again, I would not have everything in the stable value fund.
Any specific metric to indicate such a point?
Typically SV yields trail bond yields by some time. When interest rates on bonds rise to significantly exceed your SV yield you might switch. Personally myself I would not, just allocate in a reasonable way and leave it alone. Interest rates will go up and down and up more than once. Keep in mind the objective of the SV contract is to hold the NAV at a fixed point while getting better return than on cash or short bonds, while bond investments fluctuate in value.
Interesting. I think I am leaning toward the TBM fund (prefer more gov't/higher quality bonds). I will have to think about if I want to make some kind of rule for when to overweight the stable value vs the TBM. For now, I think I will move 10% of the money into TBM this week.
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Re: Stable value fund or TBM+stable value fund?

Post by retiredjg »

markcoop wrote: Wed Jul 21, 2021 2:20 pm
retiredjg wrote: Wed Jul 21, 2021 11:54 am Maybe lately, all in the stable value fund, but when bonds start producing again, I would not have everything in the stable value fund.
Any specific metric to indicate such a point?
If a stable value/guaranteed income fund actually is paying more than a bond fund, it makes sense to me to use it. When/if that changes, it makes sense to me to switch back. I do not see this a market timing. It's like picking the CD that is paying the highest rate at the time you buy it.

I've never had one, but it sounds like these stable value funds tend to tell you what they are paying and for how long they will be paying it. I see no reason not to take advantage of that.
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

retiredjg wrote: Wed Jul 21, 2021 2:59 pm
markcoop wrote: Wed Jul 21, 2021 2:20 pm
retiredjg wrote: Wed Jul 21, 2021 11:54 am Maybe lately, all in the stable value fund, but when bonds start producing again, I would not have everything in the stable value fund.
Any specific metric to indicate such a point?
If a stable value/guaranteed income fund actually is paying more than a bond fund, it makes sense to me to use it. When/if that changes, it makes sense to me to switch back. I do not see this a market timing. It's like picking the CD that is paying the highest rate at the time you buy it.

I've never had one, but it sounds like these stable value funds tend to tell you what they are paying and for how long they will be paying it. I see no reason not to take advantage of that.
The Blended Yield of the stable value fund is 2.41%. From the literature: "Blended yield is a weighted combination of the crediting rates earned by wrap contracts and the interest earned by cash and US savings bonds."

The 30-Day Yield of the TBM fund is 1.53%.

Are you saying since 2.41% is greater than 1.53% it does not make sense to put money into the TBM fund? I don't think I see any guarantee of a rate. Assuming there is no guarantee in my stable value fund, would that change whether it makes sense?
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Re: Stable value fund or TBM+stable value fund?

Post by retiredjg »

I'm not saying anything like "it would not make any sense to use the bond fund". You may have reasons to use it that have nothing to do with return.

However, if is will pay you more than the bond fund for a designated period of time, I see nothing wrong with using it alone if you are comfortable with that. If you feel that more diversification is better, even when yield is less, then you should probably use a mix of the two.
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Re: Stable value fund or TBM+stable value fund?

Post by tomsense76 »

Currently am using a mix of both a bond fund and stable value.

Also stable value can be a good place to store an emergency fund or cash needs
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Re: Stable value fund or TBM+stable value fund?

Post by student »

markcoop wrote: Wed Jul 21, 2021 3:15 pm The Blended Yield of the stable value fund is 2.41%. From the literature: "Blended yield is a weighted combination of the crediting rates earned by wrap contracts and the interest earned by cash and US savings bonds."
In an earlier post, you mentioned that you cannot find a guaranteed rate, I guess this is because your stable value fund has two components. What are the crediting rates earned by wrap contracts? Do they say?
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

student wrote: Wed Jul 21, 2021 3:48 pm
markcoop wrote: Wed Jul 21, 2021 3:15 pm The Blended Yield of the stable value fund is 2.41%. From the literature: "Blended yield is a weighted combination of the crediting rates earned by wrap contracts and the interest earned by cash and US savings bonds."
In an earlier post, you mentioned that you cannot find a guaranteed rate, I guess this is because your stable value fund has two components. What are the crediting rates earned by wrap contracts? Do they say?
If there is, I can't find it. There is a bunch of info on averages and breakdowns. There is info on the managers (% of portfolio), composition by sector, credit quality breakdown, avg effective duration (2.93 yrs), avg wtd Coupon (2.41%), avg eff maturity (3.25%), wrap contract issuers and, of course, various performance for the fund as a whole.
Mark
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markcoop
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

Small follow-up - I did speak to my 401K plan. Not a particularly enlightening call. They did confirm that the Neuberger Berman Total Bond Market fund is an index fund. I have never heard anything on these boards about the Neuberger Berman group, which in all honesty makes me a bit nervous. I have been reading up on them. If anyone else has comments on this group or this fund, I would be interested to hear those thoughts.

Thanks
Mark
retiredjg
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Re: Stable value fund or TBM+stable value fund?

Post by retiredjg »

In general, any low cost broad market bond fund will do the job that bonds are supposed to do. Since it is an index fund, I would not worry about it at all.
CoAndy
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Re: Stable value fund or TBM+stable value fund?

Post by CoAndy »

Over the last few months, I have begun to diversify my fixed income more, adding a TIPS fund and putting money in my SV fund and reducing the amount I put in to the Total Bond Fund, but still adding $ to it.
chw
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Re: Stable value fund or TBM+stable value fund?

Post by chw »

I replaced my AA in Total Bond Fund to SV last October as fund yields plummeted for Total Bond. My plan is to hold SV until the Total Bond Fund has a yield over 2.5% for 2 quarters, at which time I’ll rotate back a portion or all of the SV position to Total Bond.

I know this is timing, but with SV yielding 2.5% in my 401k with certainty, this plan seems fairly safe. I felt the risk for Total Bond to lose principal was greater than the return SV offered. 2021 results have played out as expected, with SV showing a YTD return of 1.25%, and Total Bond down about 1.6%.
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markcoop
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Re: Stable value fund or TBM+stable value fund?

Post by markcoop »

I think I'm comfortable using TBM and the stable value fund. I do own some I-bonds and will probably add TIPS at some point. I am still in the studying phase to determine how much of each and potentially incorporating any rules to make such allocations dynamic (ie., more SV when TBM yields are lower). Up to now, I have been mostly stable value for fixed income as indicated by this thread.
Mark
AnEngineer
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Re: Stable value fund or TBM+stable value fund?

Post by AnEngineer »

chw wrote: Tue Jul 27, 2021 10:51 am I know this is timing,
It's not market timing to look at a bond fund and decide it offers unattractive opportunities compared to available alternatives.
student
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Re: Stable value fund or TBM+stable value fund?

Post by student »

markcoop wrote: Tue Jul 27, 2021 9:03 am Small follow-up - I did speak to my 401K plan. Not a particularly enlightening call. They did confirm that the Neuberger Berman Total Bond Market fund is an index fund. I have never heard anything on these boards about the Neuberger Berman group, which in all honesty makes me a bit nervous. I have been reading up on them. If anyone else has comments on this group or this fund, I would be interested to hear those thoughts.

Thanks
NB is one of the oldest firms, it is not some fly-by-night operation. It does have an interesting history https://en.wikipedia.org/wiki/Neuberger_Berman and it is now owned by its employees.
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