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Learning, Sharing, and Teaching => Investor Alley => Topic started by: whammer33024 on March 22, 2016, 02:09:26 PM

Title: guaranteed interest account?
Post by: whammer33024 on March 22, 2016, 02:09:26 PM
i'm currently refining my wife's 403b allocations and came across a new one for me.  its called a guaranteed interest account and says it yields 4%. since i'm fairly new to this(read jlcollins and know some stuff but this one throws me for a loop), is this something i should consider?  i'm guessing it could take place of a bond fund, correct?  how "guaranteed" is this 4%?  i also can't find any info on the expense ratio and fees for it.  if the 4% is guaranteed forever, would it be fairly smart to put say 80% into the vanguard 500 index(she doesn't have total stock as an option) and 20% into the GIA? 
Title: Re: guaranteed interest account?
Post by: Tjat on March 22, 2016, 02:22:54 PM
I believe all account providers are required to supply a fund prospectus. Without seeing the information in that document, it's virtually impossible to answer your questions. In theory, an account that could guarantee a return could replace bond funds. The proportion would be dictated by your risk tolerance and investment strategy & timeline.
Title: Re: guaranteed interest account?
Post by: mrpercentage on March 22, 2016, 02:26:41 PM
Look into it. I have to tell you that this was the first thing I thought of:

Contemplate this at the tree of woe
Title: Re: guaranteed interest account?
Post by: beltim on March 22, 2016, 03:49:32 PM
It's almost certainly something like TIAA's traditional annuity:

It invests mostly in long-term bonds, and the interest rate it pays is supported by those bonds.  The reason it can offer a stable value and guaranteed returns is that it restricts withdrawals, and so you're not able to rebalance according to market conditions the way you could with a bond fund.  Depending on why you want to hold a bond fund, it may or may not be a suitable replacement.