Investing in only One fund vs. L-funds???

THE THRIFT SAVINGS PLAN ALLOCATION GUIDE Forums Message Board Investing in only One fund vs. L-funds???

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    Hello and thank you very much for your insightful and clear cut advice about the TSP.

    I have been invested in the tsp for 7 years and have accumulated $86k over that time span by being invested in the L-2040 Fund and now the L-2050. I started off giving only about $100 every two weeks for the two years that I was a SCEP student and now I am up to giving $14,500 per year now that I am a full time employee. My goal is to reach the $18,000 maximum contribution as soon as I can.

    I have always been of the mindset that I should be diversified. My mindset has been changed after reading a post on one of the forums on your website that explained how the S fund and C-Fund are highly diversified among a multiplicity of different industries. So a person can attain diversification simply by investing in one fund instead of all 5 like I am currently doing. As you have stated in some other posts, I will paraphrase, “a person will be affected by a severe crash in the market more so with a ‘100% S Fund allotment,’ compared with someone that has a small percentage within bonds and the rest in the S-Fund.” (This can be said for the C fund and the I fund as well.) You have mentioned that it can take a person about 18 months to get back to break-even if the fund they are invested went down by 30%. So if I had $100,000 invested and lost 30% in one year ($30,000), it would take me 18 months to get the value of my portfolio back up to $100,000, granted I did not contribute anything more to it during those 18 months? How did you calculate your “average breakeven time span rate.”

    For a person like me, in my late twenties, would you recommend that I just allocate my contributions to the S and C fund instead of dabbling in the G and F funds at all. If indeed a person can recoup his/her losses within 12-18 months, after a semi-severe or severe market crash, than I am all for just putting my contributions into those two funds.

    Thanks for your time and thanks for your honesty on this website!!! I am very irked by the people in the financial industry that do not have the “little man’s best interests” as their main goal. Like others that have posted on your forums, there are many Federal Government Employees that are not educated on how the TSP works. I have heard of instances where some employees have had all of their contributions throughout their 30 years of service to the government in the G-Fund! :/ I believe that it should be mandated that all federal employees attend a retirement seminar upon being hired. And instead of an outside broker teaching the retirement class, which is more often than not the case, an actual TSP representative or guru like yourself should teach it. I am pleased to find out through your forums that there are employees out there that are serving the purpose of teaching their fellow coworkers about how the TSP works. I can count myself in among that group because I want to help my fellow colleagues be happy in retirement.

    TS Paul

    That 18 month figure is just the average amount of time it has taken the stock market to recover to its previous level after a significant crash. So sometimes it will be longer, sometimes shorter. But on average, that’s a fair expectation.

    As for where you should invest, I can’t give individual advice and that is why I just talk about what I do. There is a place in my investing for the G and F Funds, but not typically at the same time as I am invested in the S and C Funds. And that is the reason I don’t have any use for the L funds.

    Long term, if I were going to pick just one fund and hold it forever, I would be best off investing in the S Fund. But I think there are indicators which will let me move between funds to be in the best position at different points in the business cycle, which is why I do what I do.

    The TSP Allocation Guide


    If you had 22 years till retirement. ..would you just park your contributions in the S fund? This is assuming that you were a person that did not want to tinker with his/her TSP. Or would a better recommendation be to employ an L-Fund?

    I think that a lot of federal employees do not want to tinker with their TSP because of “fear of the unknown” and so they would rather just park it in a fund and leave it, which is good practice but not if they park it in the wrong fund.

    What recommendation would you give to a newly hired federal employee regarding where he/she could safely park and forget about their funds, except for the L-funds? Would your answer still be the S-Fund?

    A fellow coworker of mine supplied me with a very detailed excel spreadsheet showing how the S-Fund has beat all other TSP funds in returns since its inception. So, if the S-Fund is the best performing, what percentage of bonds would you recommend to complement the S-Fund…if you were wanting protection against a market crash?

    Have you ever considered acquiring your fiduciary license so that you could provide investment advice? You are providing such a great service with your website and all the information that you provide that a fiduciary license would make you unstoppable! 🙂

    Thanks for your time in answering all my posts!!

    TS Paul

    If I had a 30 year horizon and had to pick one fund and couldn’t make any changes, it would be the S Fund because that will likely outperform all others over an extended time. And I would not allocate any of my portfolio to bonds, because at the end of 30 years I would be better off being entirely in the S Fund (even with the occasional crashes) than being in a diversified portfolio.

    But fortunately, I have the option of moving things around to try to avoid the major crashes and scratch out a little bit of extra performance based on economic indicators. It certainly isn’t fool proof, but it has been working fairly well for me.

    With respect to your last question, I looked at the requirements to obtain a Certified Financial Adviser certification out of curiosity a while back. If I could just take the silly exams I would probably do that, but they have all sorts of other nonsense requirements and since I don’t have any plans to make my living giving financial advice, it doesn’t have much appeal.

    Thanks for the kind words.

    The TSP Allocation Guide


    I’m an 1811 with 7 years to mandatory retirement. I’ve been invested in the L2030 for years and currently have 500k in my TSP. I’ve always been diversified from advice by a certified financial planner, but my returns are substantially less than others. I’m new to your site and have enjoyed reading about your investing strategy. I’m ready to pull the trigger and start investing differently, but with only 7 years remaining to contribute to my TSP, I’m concerned about a significant loss caused by a crash. Do you think I’m over thinking this? I know you can’t provide me personal financial advice, however have you responded to others in this forum with similar concerns?

    TS Paul

    I absolutely agree that avoiding the big loss is the most important thing you can do in your Thrift Saving Plan.

    I wrote about my views on folks approaching retirement (I’m not that far away myself) a bit in the FAQs, see:

    Frequently Asked Questions

    The TSP Allocation Guide

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