Over the past couple years I have seen numerous charts “analyzing” the Thrift Savings Plan but I’m here to tell you there are only three TSP charts you need to familiarize yourself with on a weekly basis.
The G Fund Chart
The safest fund offered by the Thrift Savings Plan without question! Unlike the rest of the TSP funds, this fund is managed by the Federal Retirement Thrift Investment Board. The G Fund buys non marketable U.S. Treasury securities that are guaranteed by the U.S. Government. A U.S. Treasury note is a debt financing instruments of the United States federal government, and they are often referred to simply as Treasuries.
The main objective of this fund is to produce a return that outpaces inflation while protecting your hard earned capital. In short you can never lose money with this fund and you will outpace inflation. The only downside to this fund is you run the risk of losing purchasing power if the fund does keep up with inflation. It is imperative that you keep your eye on the current Consumer Price Index (CPI) issued by the Bureau of Labor Statistics (BLS).
As of this writing the current inflation rate is 1.7% as you can see from the chart above the current interest rate on the G Fund is approximately 2.32% – This gives you an effective interest rate of approximately .62%
The main thing you need to look out for is that the CPI does not creep above the current interest rate on the 10 Year U.S. treasury.
My personal opinion of the G Fund is it is a very great alternative during bear markets and for retirees approaching retirement within 1-3 years. Outside of those two scenarios I would highly discourage anyone from allocating their contributions to the G Fund at best perhaps 5-10% of their portfolio but even then inflation will cripple the growth of returns over time.
The F Fund Chart
The TSP F Fund is an index fund, which strives to replicate the returns of Barclays Capital U.S. Aggregate Bond Index (Ticker Symbol: AGG), a broad index representing the U.S. bond market. The Federal Retirement Thrift Investment Board currently contracts BlackRock to manage the F Fund assets. The bond market generally consists of government, corporate, and mortgage backed securities.
Unlike the G Fund, the interest generated by the F Fund is based solely on the performance of the underlying bonds held within the index. In short this means you have the potential to make a higher yield in this fund but also run the risk of losing money.
The F Fund had a great run over the last 10 years. This is due mostly in part to the low interest rates implemented by the Federal Reserve which has fueled a bubble in the bond market. Typically when interest rates are lower bonds rise in price because investors are hungry for yield, when interest rates are higher bonds drop in price because investors can receive better yields elsewhere without taking any risk.
The main takeaway for the F Fund is it is more beneficial during periods of low interest rates than periods of higher interest rates.
The C Fund Chart
The C Fund is one of the most popular funds because it aims to mimic the S&P 500. Here at TSP Investing we have our own allocation strategy in place for maximizing gains for our TSP subscribers. While we are not going to betray our paying subscribers I would like to introduce an indicator that gives some perspective on bull markets and bear markets within the stock market.
The AAII Investor Sentiment Survey measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market for the next six months.
I have always said nobody can consistently predict where the market will move or when the market will move however, if you develop a system and stick with that indicator you can do quite well over time. While this does not come close to the system we share with our subscribers it does show a constant theme. Whenever investors pile up on one side of the sentiment, either bullish or bearish, the market tends to the other way.
Please make no mistake, the AAII Sentiment Survey is not a viable indicator in my book but it does give us some great perspective and history. Any mindful investor should keep their eye on this survey, it literally takes less than 30 seconds every week. This chart is just one of the many benefits our subscribers receive on a monthly basis, if you are looking to ensure your family’s financial security, subscribe to our newsletter and see how we can help you maximize your Thrift Savings Plan returns.
The S Fund & The I Fund
The S Fund (Ticker Symbol: DWCPF) consists of small cap stocks while The I Fund (Ticker Symbol: EFA) consists of international stocks. While there are charts to help navigate these two funds I have found they are useless. For the S Fund you could use the AAII sentiment indicator for perspective but in regards to the I Fund you’d be better off rolling the dice. In my personal experience there is no reliable indicator for The I Fund.
The three charts that I introduced to you today will without a doubt help you with your TSP allocation decisions. Use them wisely and feel free to email me (firstname.lastname@example.org) with any questions you may have. If you would like to receive weekly updates with insightful information like this then sign up for our free weekly newsletter, you can find it on the right hand side!
Here’s to our Wealth!