Where should my money be now?

THE THRIFT SAVINGS PLAN ALLOCATION GUIDE Forums Message Board Where should my money be now?

This topic contains 13 replies, has 3 voices, and was last updated by  LC 3 years, 1 month ago.

Viewing 14 posts - 1 through 14 (of 14 total)
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  • #17287

    Jeremy

    Hey everyone,

    I know that this site recommends my TSP be 85/15 with S/I, but I have been continually loosing money, hundreds daily. I have only recently begun to develop my Thrift Savings Plan account and it only has $20K, so Im concerned that with the low amount in the account, the large losses will affect my compound buildup in my TSP’s infancy. Should it really be in S/I now or should I be more conservative? Thank you, I need the advice!

    J

    #17292

    kyle

    Jeremy,
    In my opinion it doesn’t depend on the amount in your TSP. It is more about your age and the amount of risk you are willing to accept. I too have a smaller amount in my TSP, but I have most of my account in the S fund. Being that I am younger, I feel I have more time to make up for these short term losses.

    #17295

    TS Paul
    Keymaster

    I’ve said plenty on the website, so you don’t need more from me, but I try not to look at the markets over the short term. Days, weeks and months don’t matter in my Thrift Savings Plan – years do.

    As far as how we are doing right now, in the short term (which I know I just said I don’t like to look at) the S Fund is up 5.18% and the I Fund is up 7.23% in the past two weeks. That’s pretty hard to top.

    What do you mean by “more conservative”? I suppose I could eliminate the I Fund, which does tend to be more volatile. Or I could go entirely to the G Fund, which returned 0.08% the last two weeks. But any combination of the I, S, C and F funds has a fair amount of risk over the short term, which is why I don’t invest for the short term.

    The TSP Allocation Guide www.TSPallocation.com

    #17302

    Jeremy

    TS Paul,

    As far as conservative, I meant like an L fund, such as the L2020 or L2040, which will spread the money out, diluting the volatility, is that correct?

    #17305

    TS Paul
    Keymaster

    Volatility is a good thing, as long as it is in the right direction.

    The G Fund is the only “safe” fund in the Thrift Savings Plan, and it is true that any G Fund allotment in a Life Cycle fund will not be volatile. Because we were in that long bond bull market a lot of people see the F Fund as safe, but it is easy to lose money there too, particularly once interest rates really do start going up.

    As far as I’m concerned, the L Funds are only good for ensuring that you will have average returns. Typically only one or two funds are indicated as being most likely to outperform the others, which means the remaining funds in the L Funds are going to drag down the returns you could have had.

    The TSP Allocation Guide www.TSPallocation.com

    #17654

    Anne

    I don’t like any of the L funds. L2020 currently has over 51% of the assets in G & F 2030=35% & 2040=25% combined in G & F. Look at break down of the L funds before you switch your allocations: https://www.tsp.gov/InvestmentFunds/FundOptions/fundPerformance_L2020.html

    For individual funds (2013 to Year to Date, which I believe is end of October)
    G F C S I
    2013 1.89% -1.68% 32.45% 38.35% 22.13%
    2014 2.31% 6.73% 13.78% 7.80% -5.27%
    YTD 1.68% 1.46% 2.76% -0.71% 2.43%

    https://www.tsp.gov/InvestmentFunds/FundPerformance/returnSummary.html shows average per year:
    Average L 2020 L 2030 L 2040 C Fund S Fund
    1 Year 5.06% 5.74% 6.22% 13.78% 7.80%
    3 Years 10.41% 10.41% 10.41% 20.49% 20.93%
    5 Years 8.37% 9.92% 11.03% 15.50% 17.13%

    If you are willing to give up an average of 5% to 10% per year on average to sleep better, go for it but look before you leap. I regret waiting 4 years to start investing in the C fund (only had 3 funds back then and no online access) and the G fund was at 8-9% annually. Remember that even if you lose 1-2% in the S Fund this year, you should still be ahead with the government 5% match. I don’t have all in one or two funds but when I have worried about losses, tried to time or beat the market, I know I have made less than optimal decisions in my TSP interfund transfers.

    #17657

    Diana Kelly

    I am with Jeremy…..just starting to building my TSP… Currently only 15K if it loses money daily with the 85/15 is there a possibility it won’t ever have enough money in the account to rebuild itself? I read the replies and the feedback I think I’ve received was not to just look at it in terms of a “short investment” and be patient with the up’s and down’s and just keep it in there for the long term. Is this correct?

    #17660

    Anne

    You can’t be losing money everyday as the market goes both up and down. I don’t put everything in one or two funds, but I’ve been investing in TSP for 28 years and I’m a little bit risk adverse. If you are currently in those funds, don’t immediately change anything until you analyze the current situation fully and I would suggest waiting until next month, if at all. If you are afraid of losing money, you may lock in your losses. If you are not in those funds, try starting by changing your contributions to those percentages for a period of time and maybe moving a percentage that you feel comfortable with into those funds from your existing funds.

    Some food for thought:

    All of the funds started at $10 per share when TSP converted to share prices around Oct 2004. As of last Friday, the share prices were as follows:

    G Fund F Fund C Fund S Fund I Fund
    14.8796 16.9706 28.1065 36.2096 24.7805

    The highest closing price ever for each is:
    G Fund F Fund C Fund S Fund I Fund
    14.8796 17.1688 28.4005 39.3314 27.2081

    Although past performance does not guarantee future performance, you can see how each has done over the last 11 years; G Fund has increased 148.8% vs S Fund that is increase 393.3% if you had $10,000 in each when shares were initiate, you would have $14,879 in G Fund and $39,331 in S Fund as of Friday (assuming you made no further contributions). This includes of course the recession where shares fell to a low of $9.0631 on 9 March 2009 (G was at 12.4323 same day) Of course your return is going to be based on when you purchase the shares, which goes up or down daily for everything except G. If you are not comfortable with allocating as TS Paul recommends, do what you feel comfortable with. If you are really risk adverse, you may want to stay away from the I fund or use a lower percentage.

    Look at the equivalent index fund Dow Jones U.S. Completion Total Stock Market Index that is comparable to the S Fund: https://www.google.com/finance?q=INDEXDJX:DWCPF&ei=GVViVJCsNcmQqwH36oDoDQ

    Zoom in to the different time periods, 5d 3m, 6m, YTD, 5y, 10y, All–particularly the longer periods

    For I fund see iShares MSCI EAFE Index Fund (ETF) https://www.google.com/finance?q=NYSEARCA:EFA&ei=OJJiVMHAKYyTqwG0xoBw

    #17661

    Anne

    Saw error after posting, The S Fund for last 11 years is 362.1% increase as of Friday, $10,000 over 11 years would be $36,209.60. (I took the high price rather than 11/20/15 price)

    #17662

    Anne

    I also got the percentages wrong in prior post.
    G Fund only gained 48.796% & S Fund gained 262.096% in the 11 year period.

    Suggest you read all of TS Paul’s updates for this year, especially the one where he made the change, his rationale for doing so and his disclaimer: http://www.tspallocation.com/tsp-allocation-change-july-2015/

    If you don’t agree with him or anyone else’s recommendation, don’t just blindly follow. His update indicating his new position was 07/19/2015. In hindsight, it would have been better to make such a move sometime between 24 August & the end of September. I don’t think he is losing any sleep over his timing, as his stated time frame is the next year, not 4 months. If he has been 100% in S for more than the last 5 years, he has significant gains.

    #17663

    Diana kelly

    Anne when you said you don’t put everything into just two funds what does that mean? Do you put a percentage of your balance into the G fund to be safe?

    #17665

    Anne

    Diana,
    I currently have money in all of the individual funds. When I first started, I had everything in G fund, there were only 3 funds to choose from. In 1992 I took a big leap and put 35% of the balance into stock with the contributions split between C & G. In 1996, I changed my contributions to 100% C Fund, which didn’t change until 2004 when I started contributing to S & I in addition to C (S & I were not available until 2001).

    I never set a specific amount. The lowest amount in G was 6.5%, which was the result of transferring all but 10% to the stock funds in March of 2009 and the increasing stock prices resulted in the lower percentage in G Fund. I should have reduced it to 0% in retrospect as I limited the amount I would have made. The G Fund decreased to 14% until I started increasing it 2014 when I started to increase it as I was getting closer to retirement. I am currently have 73% in the 3 stock funds. I lost over $40K in the 3rd Quarter this year but I have already gained most of that back this quarter and still hoping for a year end rally.

    I only stumbled on this website recently so I’m not sure exactly how I will change what I do with TSP. I like the concept and I wish someone would have given me similar guidance years ago as I would have gained more sooner and would have prevented some of the losses during the 2008 financial crisis. Despite all of my mistakes along the way, I have done well in TSP and will be retiring early next year under VERA/VSIP. You will build more wealth in stocks than in G or F, given current interest rates.

    #17670

    NokieVA
    Participant

    I believe your biggest worries (in order) should be:

    1. Are you contributing enough — minimum 5%, prefer 10%?
    2. Are you investing in an aggressive strategy (since you’re young) – buy&hold or frequent allocations is fine?
    3. If buy&hold, are you moving money to re-balance at least yearly?

    Re-assess your strategy at least every few years to see if it’s doing what you need.

    But if you want the best returns educate yourself on how to do it smartly. IMHO, monthly allocations are the way .. I saw the light — maybe a little late — but oh well.

    I used a 50% in C and S for 12 years .. looked like a fool a few times along the way .. and looked like a genius at other times. But overall the returns were decent.

    Cheers,
    Jeff

    www.TSPinvestor.com

    #17675

    LC

    The S seems to be catching up slowly to the C. So, the formula for the plus system seems to be working out nicely.

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