Advantage to being in both large and small caps?

THE THRIFT SAVINGS PLAN ALLOCATION GUIDE Forums Message Board Advantage to being in both large and small caps?

This topic contains 1 reply, has 2 voices, and was last updated by  TS Paul 5 years, 3 months ago.

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  • #11851

    Ian Lundgren
    Participant

    When we are in the recovery phase, is there any benefit to being in both the C and S funds rather than just the S?

    If market tend to lead with S, and there is a downturn would C be a trailing indicator and therefore hedge risk?

    I’m a noob, my apologies if this is a dumb or inaccuarate question.

    Thanks!
    ian

    #11886

    TS Paul
    Keymaster

    I started this project for noobs, so don’t ever be shy about asking a question.

    Large caps and small caps tend to move in unison, with small caps moving up more on the up days, and down more on the down days. For that reason, I don’t think you can hedge with the TSP C Fund. In this phase of the economic cycle we see more up days than down, and the overall result has been that the small caps (TSP S Fund) have outperformed the large caps (TSP C Fund) by 28% over the past three years.

    So far this year the C Fund has outperformed the S Fund, but that is over a pretty short time period. My expectation is that the S Fund’s performance will surpass the C Fund over the long term, but there are no guarantees and this time could be the exception.

    The TSP Allocation Guide www.TSPallocation.com

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