Stable value funds are a good choice for people who cannot afford to lose any of their principal, says Ray Martin of State Street Global advisers. These funds, also known as Guaranteed Income Contracts or GICs, provide a guaranteed return of principal and a stable rate of return. This makes them particularly suitable for retirees and others who are relying on their principal for future income.
GICs are also for people who need to pay a known future expense. The contracts usually run for one year and sometimes run up to five years. Some GICs will require that you leave your money in for the length of the contract. Early withdrawal would incur a penalty.
Rates now are typically in the 5% to 6.5% range, which is comparable to intermediate-term bond funds but with less risk.
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Guaranteed Income Contracts (GICs)
Stock Market News
April 1999
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