Absolute beginner who put everything into G

[aznxk3vi17]

I was hired in 2007 fresh out of university, but with an engineering degree and absolutely no knowledge on finances or money management. Thus, I put 5% of my income all into G, because they said it was safe.

Fast forward to today and I'm a newly married man, and suddenly, the money matters so much more. Now, I still have the same knowledge of money, but I want to maximize my TSP.

I spoke with my friend, who is much better with money than me, and he gave me a crash course in the different funds, but I'm still a little in the dark as to how things work, and where/when I should be moving my money. From what I learned and gathered, the L fund is a good place to start as is echoed in these forums, and so he recommended my future allocations be placed 50% into the L 2050, 20% C, 15% I, and 15% S.

For interfund transfers, since 100% of my funds are in the G fund at the moment, and trickle funds slowly into L as stocks dip. What he wasn't very clear on was how much money I should eventually have in my funds. Should I move all my G funds eventually into the L? Should I leave money in the G? How much money should be in the other funds?

I'm very new at this, but I want to improve for the sake of my family and future family. Please help in any way you guys can!

 

[RazorCat]

Look over the Premium Services offered here and pick one that you feel comfortable. Each system is explained in detail under Premium Services on the TSP Talk home page.
Some are a bit moe involved than others. But, all provide research and statistical data that would be diffcult to acquire on your own. Everyone is different and therefore has different tolerance levels for risk. I'm guessing you're a young man based on your description. Congratulations on your new marriage and an exciting future. You're on the right track it appears. Invest as much as possible in TSP early on and you'll never miss it as time goes by. Great tax breaks too. Most the members that have been successful will tell you diversification is the key to building your TSP account. Leaving it in G is a safe bet (except maybe for the fact Uncle Sam borrows from it periodically to pay the bills), but you're money won't keep up with inflation sitting in G all the time. If I were just starting out I would pick one of the L funds (L2030, L2040, L2050) based on my age and put my money there until I found one of the Premium Services I could live with. Just an opinion. It's a call you'll have to make. Cruise the Forums. There's some good philosophies on investing out there. Good luck.

 

[nnuut]

Welcome to the Forum aznxk3vi17! There are plenty of different strategies on how to invest your money in the TSP. Read as much as you can, participate in the threads and ASK QUESTIONS. Hope to here from you more.
Best of luck
Norman

 

[Boghie]

aznxk3vi17,

The 'L Funds' have a mix (an allocation) already in the G/F/C/S/and I funds. They are supposedly scientific allocations. It is smart to invest in the proper 'L Fund' till you get a bit of self-training or financial advice. But, to mix the 'L Fund' of choice with the individual funds is normally considered a mistake. So, in my humble opinion, your friend is making a mistake unless he can tell you what the mixed up allocation is and what it's expected return and risk are. If he cannot tell you that he/she is guessing. The allocation he/she recommended would probably be an 'L 2070' - very risky. Are you retiring in 2060 or 2070?

So, until you get familiar with allocations, pick a L Fund that matches your expected year for age 65. Go later for more return and more risk, go earlier for less return and less risk.

As far as assets in the 'G Fund' that is a tough question. We are probably at a toppy market short term so sitting in the G might make sense. But, who knows and who knows when the correction takes place. Do you have a crystal ball. And, if you picked 'L 2050' because your 65th birthday is around that year who cares. Had you been 100% invested in any and all of the 'risky' equity funds (C/S/I) in 2008 and watched it crash you are already positive again. Even more so if you kept contributing to the C/S/I funds.

In general, though, if you are in your 20s or 30s you should have NOTHING in the 'G Fund'. It really is a bank account with a little higher interest rate. If you keep your money there you will get about the same as your Social Security check. Same with your pension if you survive the next two decades or more (and you cannot get your pension till age 60 or so). So, do you want your retirement to be three Social Security checks. There are those around here that will tell you that Social Security and your pension will be 60% of your retirement. Do you want to count on politicians jiggering numbers in unfunded 'pensions' for your retirement. I did not know I had a pension at your age and thus plowed money into TSP and into C/S/I (when I got smarter). My TSP will probably fund 80% of my retirement and I will have more income at retirement than I have during my working lifetime. Yummy.

 

[Boghie]

Also, I would advise moving all the 'G Fund' assets to either 2040 or 2050. 2040 if you want to watch the S&P500 for a little (say 10%) correction and then bump it into 2050. 2050 if you are in your 20s or 30s and would rather not mess with this stuff till you know what you are doing...

Assets in the 'G Fund' are dead assets. They are not working for you. There is really no reason to market time assets from a bank account to an investment account.

Finally, contributing 5% of your gross income will not cut it. You should be contributing at least 10%. Investment advisers normally recommend investing 15% of gross salary to retirement (that would be your 10% and the 5% match). Your 10% would actually feel like 7% or so because of the tax advantages.

 

[aznxk3vi17]

Thank you all for the warm welcome and superb input. I'm a bit preoccupied with work and stuff at the moment, but I can fill you in with further details about myself.

I'm currently 29 years old, and as such, I suppose the L2050 makes the most sense, as previously thought? Now about interfund transfers, how should I move my funds into the L balance? My friend advised not to do so all at once, and only when the S&P was at a low value.

 

[tsptalk]

Welcome aznxk3vi17 (there mist be an explanation for that name )!

Buy low, sell high is the optimal, but when is the market low, and when is it high? That's the tough part.

Stick around and read some posts and you will get a feel for what's going on. Many differing opinions, but eventually a specific strategy will appeal to you, whether it's buy and hold or trading (buy low - sell high, etc.).

Good luck!
Tom

 

[DreamboatAnnie]

Hi and Welcome...

Checkout this link showing TSP returns.
https://www.tsp.gov/investmentfunds/returns/returnSummary.shtml

Also, checkout a comparison of returns for just the S and C fund shown under post 1335 at "Market Outlook" thread.

It shows that the S and C funds provide the most returns over the long term. So you can just buy and hold.. leave it completely alone to see it grow even when market turns down. Others use strategy to move monies out of those funds to the safety of G fund when the market turns down. For example, some modify their allocations very slightly---See post 2247 (9/13/13) under Mr.JohnRoss's account thread--click on attachment and read post 2248 as well. There are really so many investment strategies. You would need to choose how much time you can invest in managing your account to decide what is the best strategy, plus taking into consideration how much risk you are willing to take.

Overall, people with many years to retire can take higher risks as there are many years to recover from major market downturns if you are unable to avoid them.

As for when to move funds, since we are in a bull market (so far) there are many that think anytime is good especially if you are going to stay in for the long term (10+ years). Obviously if you can do a transfer during a "temporary" market downturn that would be great! Some folks believe we could see a large downturn this month but who knows????

Welcome and wish you and your family the best!

 

[aznxk3vi17]

From what I gather, since I know nothing at this point, but should also take action right now, I'll watch the S&P and if things look good, start moving it immediately into my L 2050 fund. Since I'm young and willing to take some risks, but not completely knowledgeable, how does a 75% L 2050, 10% C, 10% S, and 5% I allocation sound? Or, should I just go all in to my L fund?

 

[Boghie]

From what I gather, since I know nothing at this point, but should also take action right now, I'll watch the S&P and if things look good, start moving it immediately into my L 2050 fund. Since I'm young and willing to take some risks, but not completely knowledgeable, how does a 75% L 2050, 10% C, 10% S, and 5% I allocation sound? Or, should I just go all in to my L fund?

You got it, kinda...

If it were me, I would dump 100% in the L2040 today. Watch the S&P500 for a correction. If it corrects (say -10%) move it all to the L2050 fund. If it doesn't you still have lots of equity holdings (C/S/I) that will make you mullah. That way you are 'In The Market' if things don't correct, but have some cash/bond holdings (a greater percentage of the L2040 is in G/F) that will give you a little 'alpha' if the market corrects and rebounds.

That would be a very basic 'trading' strategy to get you started.

By the way, waiting for a correction while sitting 100% in the 'G Fund' requires extensive skill or luck. What if your correction mark (let us say you believed a -20% was in the making) never happened. Well, heck, it just did. No 20% correction since March 9, 2009. You would have lost on about a 110% gain or so. You can actually see how dumb thinking like that is by looking at my AutoTracker records over the years. This year I suck because I have been waiting around with too much G/F for that elusive correction. It must be a week away:cheesy:

My advice to a 29 year old... Play the 2040 to 2050 swing till you get your feet wet. You will make bank because you will never be 'Out of the Market'. Save the bonds (F) and cash (G) for old farts like me, the smart market timers, and the dumb market timers. Make your bank early and get the captain/driver for your boat/motor home.

Oh, by the way, mixing L funds and equity funds is not a good idea. The only time I have done that is for setting up lots of '<1%' IFT moves. All it does is add complexity. I would bet that your friend cannot even tell you what the asset allocations are after setting up the one you are talking about. If you want an all equity allocation at your age I might recommend:

G: 0% - At your age does a 2% return look like a boiling over pot of gold.
F: 0% - This pig is toppy and waiting for the FED to pull the trigger
C: 40% - Your stable fund
S: 30% - Your 'alpha' fund
I: 30% - Seen our Congress/President lately

Average Annual Return: 7% after inflation
Average Annual Risk: 11%
​

Thus, one could expect a normal return (67% of the time) to be from -4% through +18%

 

[skycophigh]

Boghie, great advise, where were u 30 years ago????? anyway, ive chased my tail for 30 years in tsp, made so many wrong moves that i cant see straight. lost more money than ive won methinks.... now, im retired, cant afford to lose any in the tsp. what might u think would be a good, conservative approach for investing within the tsp??? or should i roll it out it to something easier to move around???







UOTE=Boghie;425304]You got it, kinda...

If it were me, I would dump 100% in the L2040 today. Watch the S&P500 for a correction. If it corrects (say -10%) move it all to the L2050 fund. If it doesn't you still have lots of equity holdings (C/S/I) that will make you mullah. That way you are 'In The Market' if things don't correct, but have some cash/bond holdings (a greater percentage of the L2040 is in G/F) that will give you a little 'alpha' if the market corrects and rebounds.

That would be a very basic 'trading' strategy to get you started.

By the way, waiting for a correction while sitting 100% in the 'G Fund' requires extensive skill or luck. What if your correction mark (let us say you believed a -20% was in the making) never happened. Well, heck, it just did. No 20% correction since March 9, 2009. You would have lost on about a 110% gain or so. You can actually see how dumb thinking like that is by looking at my AutoTracker records over the years. This year I suck because I have been waiting around with too much G/F for that elusive correction. It must be a week away:cheesy:

My advice to a 29 year old... Play the 2040 to 2050 swing till you get your feet wet. You will make bank because you will never be 'Out of the Market'. Save the bonds (F) and cash (G) for old farts like me, the smart market timers, and the dumb market timers. Make your bank early and get the captain/driver for your boat/motor home.

Oh, by the way, mixing L funds and equity funds is not a good idea. The only time I have done that is for setting up lots of '<1%' IFT moves. All it does is add complexity. I would bet that your friend cannot even tell you what the asset allocations are after setting up the one you are talking about. If you want an all equity allocation at your age I might recommend:

G: 0% - At your age does a 2% return look like a boiling over pot of gold.
F: 0% - This pig is toppy and waiting for the FED to pull the trigger
C: 40% - Your stable fund
S: 30% - Your 'alpha' fund
I: 30% - Seen our Congress/President lately

Average Annual Return: 7% after inflation
Average Annual Risk: 11%
​

Thus, one could expect a normal return (67% of the time) to be from -4% through +18%[/QUOTE]

 

[Boghie]

Boghie, great advise, where were u 30 years ago????? anyway, ive chased my tail for 30 years in tsp, made so many wrong moves that i cant see straight. lost more money than ive won methinks.... now, im retired, cant afford to lose any in the tsp. what might u think would be a good, conservative approach for investing within the tsp??? or should i roll it out it to something easier to move around???

Thirty years ago... I was driving my scary friends to concerts and parties

Twenty five years ago I was not investing in my retirement at all. Just the 1% auto invest to the 'G Fund'.

Twenty years ago I watched a potential large pay raise become an income drop because of the Clinton Tax Code. That woke me up.


I know this guy got into a stupid scrape, but I think the 'Buckets of Money' approach is the best strategy for those in retirement. His son runs the financial advise company now, but follows the same valid strategy. Basically, 5 - 7 years of spendable assets (cash, money market, short term bonds, annuity, etc), bucket two is comprised of medium term assets (corporate bonds, REITS, etc) that can be used to largely refill bucket 1, and finally bucket three is filled with equities (15 year time horizon).

You will end up escaping from TSP. But, I think you should meet with a good financial adviser like Lucia or Ric Edelman. You do not want to be either too conservative or too risky...

 

[DreamboatAnnie]

Agree. Stay away from G and F. Not much there...look at returns historically for each fund type going back as far as you can. Definitely keep in the market and spread it out..heavily sit in S fund. Have your contributions spread the same way so you are dollar averaging over the years...buying at both high and lows.

Best advice I ever got was to put it all in market when I first started, leave it alone, put as much money as you can into it, use your yearly colas as opportunity time to increase you contribution percentage so you don't feel it because you just forgo the increase. In hindsight, my only regret is that I only put about 70 to 90% in the market.

Don't look at my returns this year...I abandoned the old great advice, stayed out of market for most of this awesome year, and trying to learn how to time market...will see how long I last..low returns are killing me and am only partly invested..which also has a definite effect (no return for money sitting in G)

 

[jbobj]

L Funds

It might help if you see the breakdown of the L Funds.

https://www.tsp.gov/PDF/formspubs/LFunds.pdf

 

[aznxk3vi17]

Everybody, thank you so much... I know how tedious and annoying it could be explaining these things to somebody who has absolutely no knowledge on the subject, but I sincerely appreciate your advice.

So, basically I've gone ahead and scheduled a 100% allocation to my L 2050 fund, and at the same time, it sounds like I should do a 100% interfund transfer from my G to my L 2050 fund.

Is this a decent starting point? I have no idea what people mean by "correction" in relation to the S&P 500. I've literally never paid any attention to the stock market up until this point, but now that it's actually relevant, I'd like to know a bit more... a good starting point.

 

[jbobj]

correction

Some more light reading:

http://onswipe.investopedia.com/investopedia/#!/entry/,522bf652da27f5d9d01bd2a5

Essentially, the L2040 is less weighted to the S-Fund (S&P 500). If a correction were to occur, a jump to the L2050 could prove profitable.

 

[DreamboatAnnie]

....I have no idea what people mean by "correction" in relation to the S&P 500. I've literally never paid any attention to the stock market up until this point, but now that it's actually relevant, I'd like to know a bit more... a good starting point.

A "correction" is a drop in price of a stock, index or overall market. Term is a bit loosely defined but some say a small correction or adjustment is a few percent, but most think a true correction is a 10% or more drop. Once a drop gets beyond 20% it is thought the market could be changing its overall "trend" and moving from a "bull" to bear" market that could last for months or years bringing on lower and lower prices. Right now we are in a bull market but many believe it us reaching a peak (inflated) while other believe it will go on for a few more years.

 

[law87]

Hello,

While I am a Newbie myself but I said consider yourself very lucky to have your stockpile in G fund. In 2008-2011 there is market crash and flash crash so you have save yourself a fortune by being "safe" fast forward to today I recommend you follow one of the investment guru. For $200 a year, you save yourself a lot of stress dealing with investing, another option is to follow the big tracker Tom had created, the people in the top 50's obviously know what they are doing to make some massive gain. Good luck and have fun

 

[Birchtree]

Simplify your life and go 100% C fund and lock the door behind you - we are in a mega trend secular bull market that may last for decades. You should concentrate on building a base in a Roth IRA for yourself and the wife. A Roth IRA will allow plenty of flexibility - buy dividend stocks and reinvest that income for the next 30 years. Investing is not difficult but does require discipline - don't pay attention to the daily noise and sleep well while you educate yourself - it just takes time in grade.

 

[aznxk3vi17]

Simplify your life and go 100% C fund and lock the door behind you - we are in a mega trend secular bull market that may last for decades. You should concentrate on building a base in a Roth IRA for yourself and the wife. A Roth IRA will allow plenty of flexibility - buy dividend stocks and reinvest that income for the next 30 years. Investing is not difficult but does require discipline - don't pay attention to the daily noise and sleep well while you educate yourself - it just takes time in grade.

The idea of putting all my eggs into one basket scares me. Perhaps for the more well-informed or risk-seekers, that might sound enticing, but for this newbie whose idea of retirement was my dinky little savings account added onto my 5% G-funded TSP, I like the diversification (if not completely ideal) that the L funds offer to me. Maybe when I educate myself more, I'll be more adventurous, but I'll take Boghie's earlier advice and dump my funds into the L 2040 fund. I'll watch the markets and wait for a correction of 10% or more, and if that happens, I'll dump all my funds and future allocations to the L 2050 fund.

I figured that while not ideal, it's a good place to start RIGHT NOW while I explore the forums, consider expert financial planning, and whatnot. Might as well put it somewhere that's more effective than G.