Ask The Experts: Money Matters

By Mike Miles

TSP allocation

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Q. I’ve been putting money into the C Fund and S Fund but keep 50 percent in the G Fund. I’m not doing too well. I move it when the stock market dips and put it back when it rises. Can I put all of my money into an L Fund and get better results? If so, which one? I plan to retire in 15 years.

A. Really, selling after the market drops and buying after it rises isn’t working out too well? Go figure. Identifying and applying the asset allocation scheme that meets your needs with a minimum of risk would be a smarter approach. That allocation scheme, and how it is maintained, should depend entirely upon your personal circumstances and goals. There is no one-size-fits-all solution. Since you’re responsible for the management of your account and the results you’ll achieve, you’ll have to pick the allocation. The Thrift Savings Plan gives you guidance for selecting an L Fund, but, of course, they won’t stand accountable if their recommendation doesn’t meet your needs. The trick is to put the necessary expertise, affordability and accountability together. It sounds like you meet the affordability and accountability requirements, but are lacking in the necessary expertise.

If it were me, and I had no idea what to do, I’d put my money in the L Fund that most closely corresponds to my life expectancy and then get serious about figuring out what I should really be doing.

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Comments

  1. admin@TSPallocation.com Says:
    July 2nd, 2013 at 10:02 am

    Unfortunately, you are in the same situation as most Feds – your employer has put you in charge of your own retirement, but has not given you any guidance for handling that successfully. The good news is, with 15 years left you have plenty of time to develop an investing strategy that works and you are comfortable with.

    I am not a fan of the L Funds, personally. They are passive indices which do not adjust for economic conditions. Right now, for example, if you are in the L Funds a percentage of your holdings are allocated to the F Fund which is doing terribly, and will continue to do terribly as interest rates rise (which they are almost guaranteed to do over the next few years as the Fed tapers off QE).

    You can do better than that without being a finance expert. You will find a lot of information out there if you google tsp allocation. Some of it is dreck, so of it is really quite good.

    Good luck.

  2. Nicholas Farnsworth Says:
    July 11th, 2013 at 6:56 pm

    Buy and hold is not a good choice for everyone. Tactical asset allocation can lower the risk while still getting good returns.