Stable Value Investment Association - Stable Times

	Contact Us \| Site Map \| Help Desk

Home

News

Help Desk

Membership

Library

About

____________________

Library

	Stable Times
	Papers
	Fee Disclosure Template
	Key Principles

Home > Library > Stable Times > Volume 5, Issue 1

The quarterly publication of the Stable Value Investment Association
First Quarter 2001 • Volume 5 Issue 1

Beyond Luck: Stable Value, Diversification & the New Lesson

By Gina Mitchell, Stable Value Investment Association

March 16 closed out the worst week for U.S. financial markets in eleven years. Retirement savings went largely unprotected from the bear market's rough reemergence. For half of all American households who have a defined contribution plan, they could of fared better had they diversified their investments.

The public understands that equities produce higher earnings over time than other investment options. However, some seemed to miss the truism that equities have higher earnings because they also have higher associated risk. The ides of March have brought that lesson home to most.

Many defined contribution plan participants may experience statement shock when they see the risk or down side of equities after 15 years of continuous upward returns.

Now is the time to talk once again about risk tolerance and asset allocation. SVIA has developed a tutorial that explains the contribution that stable value makes to balance a portfolio and achieve an individual's lifestyle goals for retirement.

The interactive tutorial uses three basic illustrations to demonstrate the contribution stable value makes to balancing retirement investment:

Growth of $1000 for fixed income investments.
Returns for fixed income investments.
Asset allocation using equities, fixed income and stable value.

The illustrations encourage individuals to select different investment options and different time periods to see how the options performed. However, all options show a minimum of three years of historical performance. The final illustration, asset allocation gives statistics on two portfolios: Equities and Fixed Income compared to Equities and Stable Value. Equities and Stable Value shows how stable value can achieve similar return as intermediate bonds, provide the liquidity of a money market yet lower risk for the overall portfolio.

As March's events reminded everyone, participants care about the short term. Their risk tolerance may not be as high as originally imagined once a market down turn is personally experienced. For those plan participants with stable value, they have an incredible vehicle to use. It is up to us to remind them of the role that stable value can play in balancing a portfolio to achieve their individual's lifestyle goals. So, link to www.StableValue.org on April 17 to take advantage of SVIA's stable value illustrator.

Define your term using our glossary: