THE TSP ALLOCATION GUIDE

Current Business Cycle Phase and TSP Allocation.  This monthly update provides our current Thrift Savings Plan allocation and the reasoning behind that allocation strategy.

GETTING STARTED:

1. Introduction to the TSP Allocation Guide.  Start here if this is your first visit to the site for an explanation of what this is all about.

2. Business Cycle Theory of TSP Investing.  An overview of the business cycle, which investments do well during each phase, and how we apply this in our TSP allocation strategy.

3. How to Determine the Current Phase of the Business Cycle.  A discussion of the economic indicators used to determine which phase of the business cycle we are in and to forecast upcoming phase changes.

TIMELESS POSTS:

F Fund vs. G Fund in TSP Allocation.  A discussion of the two funds and their very different roles in TSP allocation strategy.

The TSP I Fund Role in TSP Allocation Strategy.  Making the best of an international fund designed for the 1970s in today’s global economy.

Ignore the Noise: Discrete Events and Meaningless Market Volatility.  A discussion of discrete events which cause temporary market movements, and why our strategy does not react to them.

Traditional vs. Roth TSP.  Understanding which is right for you.

Frequently Asked Questions.  A compilation of answers to the most common questions received.

Recommended Reading.  Books I recommend for those who want to explore investing and personal finance in greater depth.

Advanced Bond Fund Investing with the Thrift Savings Plan. A strategy for maximizing investments during periods when the TSP F Fund is favored.

The TSP Loan Guide. A breakdown of when a TSP loan makes sense, along with the basics of TSP loan eligibility and application.

THE ARCHIVES:

November 2014 Update

October 2014 Update

September 2014 Update

August 2014 Update

July 2014 Update

June 2014 Update

May 2014 Update

April 2014 Update

March 2014 Update

February 2014 Update

Warren Buffett’s Annual Letter to Shareholders. The yearly writeup from the Oracle of Omaha.

Debunking the January Barometer Myth. The “January Barometer” accurately predicts negative market returns for the full year following a down January only 33% of the time.

January 2014 Update

December 2013 Update

November 2013 Update

October 2013 Update

Shutdown and Debt Limit Update. Impacts of the current political theater on TSP allocation decisions.

September 2013 Update

August 2013 Update

July 2013 Update

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24 thoughts on “THE TSP ALLOCATION GUIDE

  1. Hey, Thanks for your guide! It really helped me a lot to understand these kind of stuff especially for starters like me.

    Been in the military for almost 3yrs(USN), 24yrs old, and to be honest I’ve been recently concerned about my financial stability and future(concerned not in a bad way), just being responsible I guess?

    Been working on CDs, investments, small family business, and now my TSP.
    I’ll make sure to read more of your guides and other resources.

    Thanks again!

  2. Great blog! Wishing I had found it 3 years ago, glad I didn’t find it 20 years from now! Anyway, I was curious if you had a resource recommendation that could help me select sound non-TSP investments for my IRA and other accounts? Thanks!

  3. I wish I had started it three years ago! In an effort to keep things very simple, my IRAs are typically invested in the Vanguard equivalent to the TSP Fund(s) in which I am currently invested. I think I have all of those identified somewhere in the various posts on the site, but I will make a point of pulling together a list under resources in the near future and noting those funds in future updates.

  4. Just found your blog. The information is presented in such a way that even a caveman can benefit from your work. It is obviously a labor of love for you, and I am grateful that you share your knowledge with those of us that need a little coaching. I will be sure to share, and I hope your blog reaches thousands. Thanks!

  5. Been using a S&P 500 moving 200/40 average to determine when to get in and out of equities (c/s/i). Has worked well, but I do tend to get out later than I’d like as well as going back into stocks late missing some early gains.

    Thanks for creating this site. It really opened my eyes to a more intelligent way of TSP trading.

    Jon

  6. Congrats on your 38.35% return!!!! I moved a lot of funds back and forth before following your Twitter feed…. but since then, I kept all my funds in S fund and the rewards are great. Thank you!

  7. Very helpful. Especially for new government employees just getting started with retirement. I’ve emailed your link to multiple coworkers. Keep up the good work.

  8. Bro,
    “Here are the final returns for the month of April. The S-fund is clearly lagging and is clinging to a positive return for the year.” (0.17% up for the year, down -2.47%)

    Wouldn’t ya know, just as I implemented your strategy. “Hang on in there, Baby…”

    Take care

    • Hi Frank

      Thanks so much for your concise comment and sorry for any confusion – I certainly wasn’t trying to mislead anyone.

      The returns I put in the July update were as of when I was writing the post in the middle of the day on 07/07 (which means that the returns year-to-date were necessarily from the previous close before the weekend back on 07/03). If you go to any of the websites which allow you to obtain TSP returns for a date range (like http://tspcenter.com/tspReturns.php, for example) and plug in 01/01/14 – 07/03/14, you will see that the returns for that time period were 8.31%, so that’s where that number came from.

      I can certainly see why any reader would think I was referring to the 07/07 close, so I will hop back in there and clarify the dates.

      Thanks, TS

    • Hi Frank

      I’m starting to get the impression you aren’t trying to be a constructive participant here, but I will give you the benefit of the doubt.

      I’m guessing you made your last comment because the C Fund has outperformed the S Fund so far this year. There will be lots of periods where a fund which has not historically performed the best during a phase of the business cycle will do better than the indicated fund for one reason or another. We don’t try to guess what the market is going to do every month, we are looking at the economy and investing based on what the market typically does under those economic conditions.

      The C Fund may very well outperform the S Fund by a few percentage points for all of 2014, and that’s fine. I will have been in the fund which gave me the best chance for strong returns. And since the S fund has beaten the C Fund by about 25% in aggregate over the past five years, I will be pretty far ahead despite using my uneducated approach.

      It is a long season and you play the odds. The 1962 Mets won 40 games, but you didn’t put your money on them to win the pennant.

      Good luck. -ts

  9. Stumbling upon this blog is like finding an oasis in the desert. I have intuitively followed your approach since the 90s, and it has rewarded me immensely, though, like Ron (above), I have, during the last downturn in the stock market, gotten out and gotten back in a little later than optimum. I am almost 4 years retired, so I no longer can make new contributions, and, because I draw a healthy CSRS pension and have had other strong investments, I will not draw on TSP until it’s mandatory, and that is over 7 years away. Unlike my peers who all have 100% of their allocation now in the G fund, regardless of their financial circumstances, I currently am fully invested in the S Fund, but keep an eye on the markets daily. Because I have just discovered your site, I have not had time to explore this yet, but I’m hoping you have some advice for those of us who continue to manage our investments in the TSP in retirement and are constantly confronting nay-Sayers who think we should be playing only the most risk-free game possible.

  10. I learned a long time ago it’s far easier to preserve existing capital in the TSP fund than it is to rely on the myth of dollar cost averaging, which robs you of the power of compounded returns from your fully valued portfolio. There is absolutely no reason to throw away hard earned equity when funds are losing money. Place your money in the G fund and wait it out, at zero cost. If you are still in the S fund you just don’t get it. There is no reason not to preserve capital and keep it working for you during a bear market, then get back in on the upswing. Remember: preserve capital at all costs, get a return during a downswing, buy low and watch it grow, go to the G fund when the bear comes back. This is the simple beauty of the TSP funds; moving money around at no cost.

  11. Hello. I am new to the federal government and am many years away from retirement. I have read a lot of your writing and it is a great help to someone who is new to this to have a lot of information to read. I was wondering if you have any specific resources for anyone who is at the very beginning of a hopefully 30+ year career with TSP. Thanks in advance for any help you can provide!

    • David,
      Welcome to the federal government! I’ve been working for the VA for 3 years after serving 20 yrs in the A.F. If there is one thing I wish I would have done at the beginning of my A.F career, it would have been to invest as much as I could as soon as I could in theTSP. I got started late (at age 40) so I have I have to invest more than someone who got started investing in their 20’s or 30’s. The books that got me interested in investing were: “The automatic Millionaire” and “the Millionaire next door”. Good luck!

      Jeff

  12. I’m 48 and eligible to retire in 2024 although realistically probably won’t be able to afford to do that. I’m naive when it comes to retirement planning and the market, but right now I’m 100% in the TSP S fund. Was just reading about the Roth option and wondering if I need to keep my 5% in the TSP S and also allocate a percentage to Roth as well. What are your thoughts?

    • I don’t believe tax rates are likely to be higher overall when I start withdrawing from my TSP in another 15 years or so. And I don’t believe that my various sources of income at that stage will be enough to push me into a higher tax bracket (and I might well fall to a lower bracket), so I have elected to stay with the traditional TSP. If you haven’t seen it yet, I have a whole post here on the Traditional vs Roth TSP subject.

  13. As for the Roth TSP option, I find that the advantage of having all your gains on Roth contributions becoming tax free upon withdrawal well outweighs the disadvantage of paying tax on the contributions now and also having to wait until 59 1/2 to withdraw. Just my opinion…

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