Using your 401(K) Stable Value Fund is a great way to place your investments into park just like you do when your GPS starts going haywire on a road trip. During these crazy times, we’ve been experiencing increased volatility which is causing some investors to have huge returns and others have ginormous losses.
I’m not sure exactly where I remember seeing or hearing a quote from Mark Cuban, but I remember him saying that in the early 2000s when his company’s stock price would rise abnormally in a day, he would sell a portion of it.
Here’s a video of Mark Cuban talking about investing (click here).
During the current pandemonium, we’re seeing in the stock market,
this may be a good time to realize some gains and take risk off the table. If you find yourself in the 1/3 of the American population that has a 401(K), one strategy is to utilize your Stable Value Fund.
In this present moment of time, you will find yourself falling into the category of,
“this is the most money I’ve ever had.”
So if you have a 401(K) through your current company, here’s a way to utilize a 401(K) Stable Value Fund to your advantage. If you don’t know what a Stable Value Fund is, it’s simply a super-duper low-risk investment strategy. Here’s a link to investopedia.com if you want to learn more.
By the time you reach the age of 30, you will have been working for about 8 years, and with a hypothetical growth rate of 8%, you would have around $150,000 to $200,000 saved according to personalcapital.com.
Here’s a couple of different ways you can use a 401(K) Stable Value Fund to your advantage.
1. Transfer a Portion of Your Balance into a Stable Value Fund.
Investing in its simplest form, buy low and sell high. If you’re feeling skeptical about the stock market you’re able to move a portion if not, all of your investments into a Stable Value Fund. This will give your investments a chance to cool down as the markets heat up.
If you’re considering jumping completely off the ship, please be aware that would be a form of marketing timing. Timing the market is something that isn’t recommended for any investors, even experts.
Remember, you’re in this for the long-term, so you can transfer, 10%, 20%, 30%, and knowing that you can get back into the game at any time. On the flipside, eventually, you’ll need to make sure that you transfer your money out of the Stable Value Fund, back into higher earning potential investments.
2. Put a Percentage of Your Contributions into a Stable Value Fund.
Your contributions that you’re placing into your 401(K) can be changed to be deposited into a Stable Value Fund. This strategy will allow you to build up the conservative portion of your portfolio because, during times of high volatility, this may cause portfolio drift in your investments.
However, a Stable Value Fund is very low risk, so depending on your risk tolerance you need to eventually readjust your investment strategy over time.
Your 401(K) does not make changes for your automatically!
Overall, the Stable Value Fund is a great way to take risk off the table and give yourself the opportunity to breathe. It’s not an investment solution that is going to make you more than a few percent. So you have to be cautious that you’re not making emotional decisions, but rational decisions when it comes to the money you’ve worked hard to save.