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One of my colleagues mentioned that he primarily uses the stable value fund within the 401k and keeps his equity exposures in the taxable accounts. He argued that it is pretty hard to find a tax-deferred no risk 5% return that has no interest rate risk.

Chris made some good points. However, I agree with your colleague that the Stable Value Fund (a new name for GICs guaranteed investment contracts) is currently very hard to beat as a fixed income investment. Where else can you find 5% with no interest rate risk in this market. The insurance companies assume the risk as I understand it. By the way, I am retired and have a very large sum sitting in my 401k Stable Value Fund. I asked Vanguard, my company retirement plan manager, if they had anything else like it and they said no.

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