Blog: Vanguard stable value funds vs. money markets in three charts

April 6, 2021

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Patricia Selim

Patricia Selim, CFA

One of the most common questions I get about stable value funds is, "Why should my plan use stable value funds instead of money market funds?" It's a fair question, and one I can answer in three simple charts.

First, stable value funds historically have higher returns than their money market counterparts. In fact, Vanguard stable value products have outperformed money market funds over the long term in multiple market and rate environments. You can also see stable value has outperformed money market funds by an average annual basis of 180 basis points over the last 10 years.

Stable Value Money Market rolling returns

Past performance is no guarantee of future returns. There may be other material differences between products that must be considered prior to investing.
Rolling 12-month returns as of December 31, 2002, through December 31, 2020.
Sources: Vanguard and Lipper, a Thomson Reuters Company.

The second chart I'll share is one of my favorites. Vanguard stable value can provide returns on par with short- to intermediate-term bonds, but with the stability you generally see with money markets. That's a very attractive risk/return profile. Combine that with the chart above, and the case for Vanguard stable value gets stronger.

Stable Value returns chart

Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. There may be other material differences between products that must be considered prior to investing.
Sources: Vanguard; Bloomberg Barclays; and Lipper, a Thomson Reuters Company.
Based on 10 years of returns and return volatility (standard deviation of rolling 12-month returns) as of December 21, 2020.

This third chart shows stable value funds are not only more widely offered in defined contribution plans, the demand is there as well. Stable value funds are twice as popular with participants as money market funds.

Stable Value offers chart

Source: How America Saves 2020, Vanguard.

Bonus chart!

I know I said three charts but I couldn't help myself! As you probably know, stable value funds invest, directly or indirectly, in high-quality, short- to intermediate-term fixed income investments, and are distinguished from bond funds by maintaining a constant $1 share price net asset value (NAV). The chart below shows how the returns from the underlying strategies are smoothed to provide consistent, positive returns via the crediting rate for stable value investors. The smoothed returns and $1 NAV are enabled through the use of wrap contracts.

Credit rating chart

Past performance is no guarantee of future returns.
Source: Vanguard, as of December 31, 2020.
Note: The data is for Vanguard Retirement Savings Master Trust and used here for illustrative purposes only. The Master Trust is a collective of all share classes, and figures are net of contracts fees but gross of administrative fees. Participants’ actual net returns will vary based on share class.

You can read our research, Stable Value Funds: Considerations for Plan Fiduciaries, to learn more about the benefits and risks of stable value funds.


  • A stable value investment is neither insured nor guaranteed by the U.S. government. There is no assurance that the investment will be able to maintain a stable net asset value, and it is possible to lose money in such an investment.
  • Vanguard Retirement Savings Trust is not a mutual fund. It is a collective trust available only to tax-qualified plans and their eligible participants. Investment objectives, risks, charges, expenses, and other important information should be considered carefully before investing. The collective trust mandates are managed by Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc.
  • All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.