When I first signed up for TSP retirement fund, I was greeted with a nice brochure and a breakdown of each fund that I can invest in. It all just sounded like gibberish nerd talk and I could not decipher exactly what I was getting myself into. Now, almost seven years later, I am older, grayer, and wiser (hopefully). The breakdown below is what I pulled from tsp.gov in explaining each funds.
G Fund
The G Fund assets are managed internally by the Federal Retirement Thrift Investment Board. The G Fund buys a non-marketable U.S. Treasury security that is guaranteed by the U.S. Government.
F, C, S, and I Funds
The Federal Retirement Thrift Investment Board currently contracts BlackRock Institutional Trust Company, N.A. (BlackRock) to manage the F, C, S, and I Fund assets. The F and C Fund assets are held in separate accounts. The F, C, S, and I Funds are index funds, each of which is invested in order to replicate the risk and return characteristics of its appropriate benchmark index.
C Fund is invested in a stock index fund that fully replicates the Standard and Poor’s 500 (S&P 500) Index, a broad market index made up of the stocks of 500 large to medium-sized U.S. companies. The C Fund’s objective is to match the performance of the S&P 500. The F, C, S, and I Funds remain invested regardless of the performance of the securities markets or the overall economy.
L Funds
The L Funds are invested in the five individual TSP funds based on professionally determined asset allocations. You choose which lifecycle you want based on how many have left before you retire and the fund will adjust based on how close you are from retirement. More aggressive in the beginning and more conservative as you get closer to retirement. I tried it for a year, it lost a bunch of money, and I got squirrelly and decided to do a percentage pie and put some in each fund…I still didn’t understand it much in the first couple of years.
Let me break the funds down in much simpler term just in case the above explanations don’t make sense.
• G Fund: Government securities investment that keeps up with inflation. You won’t lose money investing in this fund, but you won’t make much either. TSP places all of you investments in this account automatically. Adjust accordingly or cry tears or regret down the road. Average annual returns since inception: 5.24%
• F Fund: Bond, James Bond. Seriously it’s great to have this investment (about 20%) to balance out your overall portfolio. The earnings consist of interest income on the securities and gains (or losses) in the value of the securities. Investment risks are relatively low but the returns are a little bit higher than G fund. Average annual returns since inception: 6.45%
• C Fund: S&P 500. What does that mean? That means that as an investor, you are buying shares in 500 of the largest companies in the United States. Apple, Google, Microsoft are all yours! Bigger risk but much bigger gains with this investment. Average annual returns since inception: 10.09%
• S Fund: Dow Jones. Ding ding ding ding! You’ve heard the bells before on TV multiple times and in the news over and over again. Small to mid size U.S. companies not list in the C Fund is what you will be investing in. Companies include American Express, Coca Cola and WWE. High risk and high reward. Average annual returns since inception: 8.37%
• I Fund: Go international! Now you have the chance to buy shares of international companies. Returns are not that good compared to the above funds, so invest very little in it. Average annual returns since inception: 4.23%
My TSP Results from 2010-2015
2010: Closing Account total: $512.69
• Personal Investment Performance: 0%
2011: Personal Investment Performance: -5.68%
• L 2050: $-294.37
• G: 33.33
• F: 28.88
• C: 21.33
• S: -13.53
• I: -39.30
2012: Personal Investment Performance: 6.78%
• G: $61.01
• F: 114.80
• C: 132.46
• I: 134.27
2013: Personal Investment Performance: 10.53%
• G: $94.97
• F: -33.50
• C: 359.99
• S: 424.89
• I: 242.45
2014: Performance Investment Performance: 4.45%
• G: $101.31
• F: 117.37
• C: 388.97
• S: 225.59
• I: -186.41
2015: Closing Account Total: $20,495.78
• Personal Investment Performance: .19 %
• G: $89.31
• F: 15.66
• C: 62.69
• S: -166.69
• I: -15.72
Within a 5 year period, I went from having enough money to buy a PS4 Uncharted bundle and a pair of And 1 shoes, to buying my previous 2014 Mazda 6! Start early with TSP, take more risk when you’re younger by putting between 80-90% on C&S Funds, and do not mess with the asset allocation once you have it set. Just keep throwing money at it ! Traditional TSP all the way to maximize tax benefits. That was my mistake early on.
I ended up fiddling with how much percentages I want to put for this fund and then I would switch and put it on that a different fund. Not a good idea. Stick with the tried and true 80/20 ratio. 80% stocks with 20 percent bonds/G fund. Or just put it all on C fund let it ride. Do not under any circumstance panic and jump ship when everybody is telling you to sell sell sell! The market always and I mean ALWAYS goes up.
Leave a Reply