Good Value

Stable-value funds (also called capital preservation funds) provide guaranteed returns. Often found in 401(k) and 529 plans, they contain a mix of high-quality bonds and cash, wrapped in an insurance contract. Your principal and interest are guaranteed by the insurance, giving you an extra layer of protection.

These funds returned about 5% in 2007, which looks appealing now that money market funds yield 4.2% or less, and short-term Treasuries pay less than 3%. Some experts suggest holding a third of your fixed-income allocation in stable-value funds.

It should be noted that stable-value funds have delivered returns from 0.5% to 1.5% more than money market funds, with less variation of returns.

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