- When you change your TSP contribution allocation, do you also change which fund your existing TSP balance is invested in?
- I panicked (or followed someone’s advice), sold when the market dropped, and was in the TSP G Fund when it went back up to new highs. Should I wait until another dip before I go back to the stock fund?
- I am currently invested in one TSP fund, but want to move my balance to another. Should I move it all at once?
- I am nearing retirement, should I change my TSP allocation to be more conservative?
- Why aren’t you sending out an update to address the news from DC or the current market downturn?
- I’m new to investing and it’s all pretty overwhelming. Where should I start?
- How did the business cycle strategy perform in years prior to 2013?
- Does a TSP loan appear on my credit report?
- Everybody talks about diversification in investing. Doesn’t that mean it is a bad idea to be 100% in a particular TSP fund?
- What’s the difference between the TSP Allocation Guide strategy and the other TSP services and guides on the internet?
- How do you invest your non-TSP funds?
When you change your Thrift Savings Plan contribution allocation, do you also change which TSP fund your existing balance is invested in?
I panicked (or followed someone’s advice), sold when the market dropped, and was in the TSP G Fund when it went back up to new highs. Should I wait until another dip before I go back to the stock fund or lock in my losses and move it back now?
Mistakes are part of investing. The hard part is putting it behind you and moving on. With respect to locking in losses, I try to look at every decision as if my Thrift Savings Plan balance is all in cash and I am deciding where to put it that day. Whatever happened in the past doesn’t matter – all that does is where the best place for the money is today.
I am currently invested in one Thrift Savings Plan fund, but want to move my balance to another. Should I move it all at once?
I am nearing retirement, should I change my Thrift Savings Plan allocation to be more conservative?
I believe that with some very rare exceptions, Thrift Savings Plan allocations should not change based on age. You don’t stop earning when you retire unless you handicap yourself. This is because I believe that at any given time, there is one Thrift Savings Plan fund which is the right fund to be in and all of the others are going to do relatively poorly in comparison. My allocation almost certainly won’t change when I near retirement because my goals for my money won’t change. When I retire at 60, let’s say, I will hopefully still have another 30 years or so left and I am going to want for my Thrift Savings Plan balance to keep growing as much as possible for all of that time. Why would I switch to something “safe” like the TSP G Fund which is going to just barely keep up with inflation as I start approaching retirement when my earnings horizon goes out for decades to come? Imagine the difference between the 1.5% I could get for the G Fund right now, compared to the 38%+ which I got for the S Fund in 2013. Now compound that for 20 or 30 years.
That said, the market is occasionally going to have a “correction” of 5 to 10% for reasons unrelated to the economic cycle. You can’t predict those, but the market is typically back to break-even within two months. Even when we see a major “crash” of 30% or more, the market has returned to break-even on average within 14 months. For that reason, if I am planning to take a large withdrawal from my Thrift Savings Plan upon retirement to pay off a property, start a business, or travel the world – it would make sense to me to protect that portion of funds which I am counting on using from a significant decline for a year or two prior to withdrawing it. But the rest of my TSP balance will remain invested in whichever fund is indicated by the phase of the economic cycle we are in.
Why aren’t you sending out an update to address the news from DC or the current market downturn?
I’m new to investing and it’s all pretty overwhelming. Where should I start?
Read everything. Please don’t read only this website and make investment decisions based on what you see here. Read everything you can lay your hands on and decide what make sense to you and works for your situation. Please remember that most of the stuff out there in the day-to-day media is drivel intended to sell advertising. I do have a few books listed on my Recommended Reading page which would be a good place to start your investing education, including A Random Walk Down Wall Street and Investing Without Wall Street.
How did your business cycle strategy perform in years prior to 2013?
All in all, I think someone being fairly moderate with this strategy would have lost about 10% in the early market drops, but would have missed out on the catastrophic fall in the second half of 2008. They would have profited nicely from the rise in bond values as interest rates were slashed. And as soon as the indicators showed signs of a recovery they would have been back into the TSP S Fund and seen returns of 30%+ for three of the past five years, 18% in 2012, and one essentially flat year (-3.3%) in 2011 due to the Eurozone crisis.
Does a TSP loan show up on my credit report?
Everybody talks about diversification in investing. Doesn’t that mean it is a bad idea to be 100% in a particular Thrift Savings Plan fund? And isn’t that why the TSP LifeCycle Funds are the default for new employees?
What’s the difference between the TSP Allocation Guide strategy and the other Thrift Savings Plan guides on the internet?
The short answer is that this strategy anticipates downturns in the economy, which inevitably lead to downturns in the stock market. We don’t try to time the stock market, we try to time the economy which is much more predictable and is not subject to manipulation by Wall Street.
Other guides seem to fall into two categories: (1) “safe” allocations which are guaranteed to get average returns and which largely look like the TSP LifeCycle funds, and (2) market timers who attempt to use technical analysis and news events to predict short term moves in the stock market.
I haven’t spent any time looking at the paid services except to note that their annual returns look poor to average. Maybe I’m missing something, but I can’t imagine paying hundreds of dollars a year to under-perform the S&P.
The vast majority of my non-TSP investments are in mutual funds or ETFs invested in the same sectors which my Thrift Savings Plan strategy follows. I generally use Vanguard funds because of their low expense ratios. See this page for the Vanguard equivalents to the TSP funds.