Great Fund

[AllexBancs]

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This acts like a short term bond fund but no principal risk. What's not to like. Even after I retire I am considering leaving some $ in this fund. Comments? Thnx. AB:dude:

 

[tsptalk]

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AB -

We've been having a similar discussion in the C fund Forum. It seems to pay to be more aggressive over the long term and invest in the stock funds. Although I use the G fund oftenwhen we are due for, or are in, a pullback in the market.

Here are the cumulative returns of each from from 1988through 2003. Of course the S and I funds were not available throughout this period butthe indices were.

G Fund F Fund C Fund S FundI Fund20% Each Fund

185.28% |239.06% |524.42%| 499.20% | 116.15%|311.69%

Two comments. The international fund did extraordinarilywell in the early and mid-eighties whichit is not included here. Also, the 1987 crash occurred shortly before these returns.

Tom

 

[Rolo]

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Also, you haveinflation risk with the G fund.

 

[redsox99]

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Can anyone tell me if they can figure out within a day or two, when the G fund pays out? It looks to be about 3 times a month.

 

[tsptalk]

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I haven't been able to figure out the pattern exactly but I didn't put much time into it. As you probably know, if you get 5 or 6 days without an increase, it's a pretty good bet you'll see it in a day or two.

 

[Rolo]

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tsptalk wrote:

...if you get 5 or 6 days without an increase, it's a pretty good bet you'll see it in a day or two.

Yes, I love flat bases!

(Look at VLCCF for the past year.)

 

[azanon]

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This acts like a short term bond fund but no principal risk. What's not to like. Even after I retire I am considering leaving some $ in this fund. Comments? Thnx.

The short answer is poor protection against inflation, and poor total return.

They are great for your "emergency fund". They are also great if you want a stabilizing part to your portfolio. However if 1. Your investment horizon is greater than 5 years and 2. Your not a market timer thenhonestly, i'd avoid it alltogether. I'd use F fund instead of G if you want less volatility, if you're looking to buy-and-hold.

Almost all sites that loosely speak of retirement diversification speak of stock/bond ratio. U.S. Treasuries are left out of that discussion for a reason.

 

[Rolo]

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I would consider the G fund "cash equivalents", likea really good Money Market Account. Using the connotation of the term, I do not consider it an investment.

 

[Pete1]

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There is a great site where you can play around with different risk levels and the TSP funds. It is called financialengines.com and was created by Nobel laureate William Sharpe. I have often punched in the F fund for the fixed component of a long-term buy and hold allocation and invariably, it recommends the G fund instead. For example, I just told it that my allocation is:

40C, 25S, 25I, and 10F and it recommended 35C, 30S, 25I, 10G. In other words, lower C fund, increase S fund, and get rid of F. The returns project out higher at the same risk level. But it seems to be a pattern where any time I indicate tha I am using F, they remove it and recommend G. Usually, financialengines is a fee service but since TSP has a limited number of funds, they are currently waiving the fee. Hopefully, this will not change.

 

[Pete1]

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I would consider the G fund "cash equivalents", likea really good Money Market Account. Using the connotation of the term, I do not consider it an investment.

Financialengines also categorizes G fund as cash.

 

[Guest]

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Is financialengines a completly free service? I didn't quite understand the need for the agreement they were asking for, and about paying federal/state and local taxes?? Can you shed some light on this. Thanks

 

[Pete1]

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I'm not sure. The phone number is listed on the site and so, suggest you give them a call to make sure. They indicated to me that the fee was waived for TSP accounts but not for outside accounts.I was advised that I would need to upgrade for my outside accounts and so, maybe the tax questionsapply to outside accounts that you would receive advice for.

 

[Guest]

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Once you input what your investing in, TSP, you continue unabeited. They ask for no charge card or anything. Looks like I'll be a millonaire in 20years!

 

[Pete1]

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I called again this morning and once again, they indicated the fee is waived for TSP accounts. The fee for tax deferred outside accounts is $39.95 per quarter.

 

[JRL]

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In my opinion the G fund seems hard to make hay in.Because,#1 after inflation(which uncle sez was what 2.8-3.0%) your maybe making 2%.-3%.#2 Taxes; Some day you will pay them on some of you treasure.(maybe at a lower rate)but,it does peck away some %.That maybe leaves you 1-2% gain in the G fund.

DIVERSITY + TIME

 

[Rolo]

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Welcome, JRL!

 

[Rod]

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JRL wrote:

In my opinion the G fund seems hard to make hay in.Because,#1 after inflation(which uncle sez was what 2.8-3.0%) your maybe making 2%.-3%.#2 Taxes; Some day you will pay them on some of you treasure.(maybe at a lower rate)but,it does peck away some %.That maybe leaves you 1-2% gain in the G fund.

DIVERSITY + TIME

Yeah, I agree. I'm not invested in the G unless I'm seeking "shelter" from a storm.

Some folks will invest in the G every 5 or 6 days just to catch the penny gain. But I feel that can be a real waste, expecially if stocks perform well that day.

Would you rather gain 1cent per share in G, or 15 to 20 cents per share in S???

That's why I don't worry about catching the 1 cent gain in G.

My 2 cents

 

[Guest]

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Wouldn't it be great if we had some "inverse" funds to play with?

 

[yakers]

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I don't think the G Fund is great by iteslf but it is good as part of an overall asset allocation to balance out the risk in stock funds. I am near retirement (55 soon) and I had a TSP AA of 40%G, 20% C,S & I. So 60% stock but in a sense no bonds. I am now putting new contributions into the 2010 L Fund. I don't think anyone can predict the market, I certainly cannot, but there is at least as good a chance it will take a serious dive as go up slowly over time. I was all in stocks for a long time and did well by it but my risk level has gone down and I like the G Fund more.
Now there are people who are financially ignorant who just choose the G Fund or the C Fund and put everything in it. But AFAIK the best way to proceed is to have a mix of assets and to rebalance occasionally. Within the mix of assets you gotta love the G fund, it really is nice to have a bit less volitility as you get nearer retirement. For you young folks go ahead with all C if you want ot C, S & I but really, you will want some G when you get older and your heart gets a bit weaker.

 

[Rolo]

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yakers wrote:

you will want some G when you get older and your heart gets a bit weaker.

ehehehehe...true. "Capital preservation" becomes an issue indeed.

Welcome to the forum!