(MONEY Magazine) -- Question: Where do stable-value funds fit into a portfolio? They look like a good investment right now since they don't lose value as interest rates rise. -- Jim Sterk, Euclid, Ohio

Answer: Think of stable-value funds as bond funds for the nervous. You can buy them only in a defined-contribution plan such as a 401(k), not as mutual funds.

Aside from that restriction, what makes a stable-value fund different from a standard bond fund is insurance guarding against principal loss. Bond funds lose value as interest rates rise, but stable-value funds stay, well, stable. Last year their yield was about 4.75%, beating the total return of 2.4% for the overall bond market (where falling prices offset rising yields).

If you're risk-averse, they are a good choice, but consider the caveats. Security costs money; some expense ratios can be much higher than the 0.5% limit that Money Magazine recommends for most bond funds. If interest rates fall, stable-value holders don't get any payoff from increasing bond prices. Finally, 401(k) plans often restrict redemptions of stable-value funds to prevent short-term trading.

Stable-value funds can be good for people who are drawing money out of their retirement plans, says Robert B. Loveman of the advisory firm Brownson Rehmus & Foxworth. "You spend no time lying awake at night," he says, "worried the principal will go down."

Question: What level of poor performance makes a mutual fund investment a flop? If a fund has dropped two quarters in a row, is it time to jump ship? Or would that make me Chicken Little? -- Amber VonDran, Elgin, Ill.

Answer: Answer Guy can't say precisely how long a streak should be to qualify a losing fund as a "loser." But he knows it's measured in years, not months. If you can't give a fund manager two quarters' worth of breathing room, stick to index funds.

In any case, use a rational yardstick: In place of absolute returns, compare your fund with others investing in the same asset class. (It's easy on Morningstar.com.) If your fund has performed in the bottom 25% of its peer group for several years, and if it's doing poorly when market conditions are ripe for its strategy to shine, start ringing the alarm bell.

But rather than simply selling when you see bad performance, investigate it, says Morningstar's Christine Benz. Has the fund had a management change? Has it grown too big to implement its investment strategy? Is there upheaval at the fund's parent company? "You need to get concerned," says Benz, "where you have poor performance combined with some other factor." That suggests a cold streak will endure.

Looking for some answers? Send us your questions about investing. E-mail answer_guy@moneymail.com.