Reserve Fund in G

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    Do you ever advocate keeping a certain percentage of money in either G (for example, 10-15%) to take advantage of dips in the market, regardless of the economic cycle? Even in bull markets or an excellent economic cycle, there are times when pullbacks occur and if you are in 100% of S, for example, you would have nothing in “reserve” to take advantage. Of course, the “reserve” would be costing you return if no pullback occurred. I’m not advocating keeping it in there to buffer against potential loss, but to aggressively invest if a pullback happens, even a temporary/smaller one that does not rise to the correction level.

    I love the site and your well thought out positions and aggressiveness. Whenever I see reports that point out over half (or nearly half) of TSP funds are in G, regardless of economic cycle, I just shake my head and woder why people throw away such opportunity.

    Thanks again!

    TS Paul

    For someone who spends as much time reading (and now writing) about the financial markets as I do, I am not an active trader by any stretch of the imagination.

    I always stay fully invested in whatever fund(s) I believe are indicated by wherever we are in the economic cycle and, as a result, I don’t keep a reserve in my TSP allocation.

    I am a bit more active in my other accounts and will occasionally dump money into an index fund or individual stock when I feel it has been oversold on a pullback to try to do exactly what you are asking about. But I generally don’t have much cash sitting around and don’t hold it in reserve waiting for a pullback.

    I can’t put my hands on it now, but there was a very good study I read some time ago which broke out the surprisingly large percentage of the annual gains in the stock market which happen in just a few big days each year. The thrust of the article was how easy it is to miss those when you try to time the market and turn what could have been a 20% year into a 10% year just by being on the sidelines for a brief period. I think that concept – that I don’t want to take a chance on missing the big up days – has convinced me not to try to game the market too much.

    Thanks very much for the kind words. I started the site to hopefully get a few of the folks who are 100% G Fund or have randomly chosen a mix of funds based on their gut to do a little more thinking about what they are doing. The difference between 1.67% (the G Fund) and 31% (the S Fund) just in the past year is pretty stunning.

    The TSP Allocation Guide


    One thing you need to be mindful of is the limitations of TSP. Although you can move money from other funds to the G fund every day, you are limited to 2 trades per month if you moving money out of G, or simply changing the percentages among the non-G funds. If you increase the %age of G twice, early in a month, you will not be able to move money into any other fund until the next month, other than current contributions.

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