Is the G fund the safest place for me now?

[esswun]

I moved my money out of L2030 and put it all in G back when they were predicting big 401k losses around the debt ceiling crisis. I now have 100% allocated to L2030 but 96% of my total money is still in G. There's about $40K in G and a couple thousand in L2030.

I know next to nothing when it comes to investing so I liked the L funds. Should I stay how I am right now or is it safe to just move back to L2030 from G? I just don't want to lose a huge chunk of money so if I have to stall growth for a while in G, I'm okay with that as long as it's safe for the current market conditions.

Thanks for any advice.

 

[SteelSaving]

What's your definition of safe? Are you including inflation in your thought process?

I can tell you that you will never lose a dime in the G fund (at least it hasn't so far... never underestimate the politicians) but the actual worth of that account may not keep up with inflation which in my eyes, makes it worth less over time.

 

[esswun]

Thanks for reply.

Right now I consider "safe" just not having the chunk of money I have right now being reduced by thousands of dollars. That's why I moved it to G. Prior to that the L2030 was doing fine for me I just was afraid I'd lose a lot on it due to current problems (that I admit I know little about; was just going off fears of people's 401k accounts tanking).

I intend to just put everything back into the L2030 at some point but I just don't know if it is wise to do so now or weather things out for a while longer while i "hide" in G. I don't even know if I even needed to make the move into G or not; just felt like the safe thing to do with my limited knowledge.

 

[tsptalk]

Welcome esswun! The purpose of the L funds was to expose you to enough risk for your age or how long you had until you retired. I would recommend either staying in the L fund, at least until you know a little more about what you are trying to do - whether that is trying to time the market, or invest for the long term as a buy and holder, etc.

Many new "timers", hurt themselves by doing the wrong thing at the wrong time because they just don't understand some concepts like contrarian sentiment, overbought / oversold, etc. Usually they are better off not doing anything. It's kind of a like playing poker with enough knowledge to want to get in a game, but not enough to actually win. In that case staying away wouldn't cost them anything and they could read up on the game before jumping in. Of course experience is another factor so you have to play eventually to become a winner.

Good luck whatever you decide, and thanks for joiing us!

 

[clester]

G fund is safest. It will never lose money. It's a special fund only for tsp and aims to meet or beat inflation. Rates are very low right now though. All the other fund can lose. Over the past ten years is has done better than the rest I think..

 

[uscfanhawaii]

Welcome to the boards, esswun!
Lots of ideas and suggestions here....you can read to your hearts content.
I will say this, no one method works all the time. It is not unusual to see one year's top AutoTracker be the next year's bottom AutoTracker. Even the pay services go up and down. I try to read a lot of ideas and then make up my own mind. Of course, Tom's daily Market Commentaries are a must read. He does a good job of telling both sides of the story so you can make up your own mind!
You don't say how many years you have been in TSP, but if you chose L2030 cause that is when you plan to retire, then you still have a lot of years to go. The key here is to sock as much away as possible. 5% minimum to get all the gov't matching, and as much add'l as you can afford. Since you have a long way to go, dollar cost averaging can really be in your favor. Stay in stocks, or your 2030 or even 2050, and over time it will go up, and you will be dollar cost averaging along the way. If you are in G, you run the risk of missing the next big leg up, so either way you are taking some sort of risk.
Good Luck!!

 

[nasa1974]

esswun, Welcome to TSPTalk. Whatever you do with your money depends on how much risk you are willing to take. Leaving you money in G is the safest place to be but may earn you less than if you kept it in L2030. I sat in the G for years and made some money but it wasn't until I realized what I could do with my money and accept some risk that I was able to really add to my account, even with the losses. Just remember you are the final decision for your account. We just have opinions.

 

[esswun]

Thanks for all the replies.

Well, I've been in the TSP since 2002 and put everything into the L2040 fund as soon as I found out it existed. I had a break in service in 2007-2008 and took a $10K distribution from the $25K I had and put the other $15K in a traditional IRA where it sat until earlier this year when I transferred it to my TSP.

Looking at the history of the funds, major losses occurred in 2008 and I feel like I dodged a bullet by taking my money out of the TSP and putting it into the IRA when I separated.

I got back into the federal government near the end of 2008 and started back in the L2030 this time as I will have mandatory retirement in 2033 unless I get a different federal job. I was putting in the maximum for a while but have had to cut back a little to have more take home pay but am still putting in 15% right now. Just took my IRA money and added it to my TSP and I also have a small TSP loan that I'm paying back.

I was afraid of another big drop like the 2008 one I dodged and that is why I went to G with everything. I'd like to just put it all back in L2030 which seemed to be earning (not sure if it was "a lot" but it always went up) and just let it sit while it does it's own thing. Maybe someday I will learn more about investing but I can obsess over details like this and I'm afraid I'd spend my life worrying about all the individual funds, which is why L works for me.

I think I might move half back to L2030 now and then the rest after a few more months if there are no big drops.

 

[SteelSaving]

Having your money in an IRA instead of TSP didn't make it necessarily safer. What sort of investments did you have?

 

[esswun]

When I quit my job in 2007 and took a distribution from my TSP, I had to put the remaining funds into something else to avoid getting taxed on that part too. Didn't know what else I could even do but put it in an IRA. Had I not taken part as distribution I would have just left it all in TSP but I needed some cash. In the IRA it didn't really make much money but I didn't lose any. I saw the L2030 fund lost like 20 or 30 something percent in 2008 so I felt that I would have lost a ton had it been left in there during that specific time.

As far as type of investments I had? That was it, everything I had was just in that IRA set up at my credit union. Now that I'm back, everything I have is back in the TSP again.

See what I mean? I admittedly don't know anything. All I know is my investments are in whatever the TSP does for me hehe. I am considering buying fractional gold and silver with the money I typically put in my savings account each pay check though; but that's a whole different thread.

 

[Boghie]

eeswun,

Timing the market is for experienced investors as Tom informed you. I, for one, am not experienced enough. The best I can do is have a few allocations. One for a good market, one for a normal market, and one for a bad market. In your case, maybe use the L2040 for a good market, the L2030 for a normal market, and the L2020 for a bad market. By the way, each of those funds has a percentage of their holdings in the 'G Fund' along with the other funds (F/C/S/I).

Here are your numbers on your market timing experience.
Starting Value on July 15: $40,000
Ending Value on October 14 in the 'G Fund': $40,212
Ending Value on October 14 if in the 'L2030 Fund': $37,747
Difference: $2,465

So, your experience in market timing has saved you about 6.5%. And, September and October are notorious months.

Here are the negatives:
You have about 23 years to go till retirement (a very convenient number because we can use the fund inception date).
Investing $40K in the C Fund for the past 23 years:

• Average Return: 9.55%
• Your $40K becomes $325,945
• You annual income of $33,880 - $13,528 inflation adjusted.

Investing $40K in the G Fund for the past 23 years:

• Average Return: 5.93%
• Your $40K becomes $150,486
• You annual income of $12,315 - $4,764 inflation adjusted.

And, the 'G Fund' was making 9% in 1988 and 1989. Will we see that again? Even with the big numbers early the 'G Fund' doesn't cover your rent - and that 'Rent Is Too High'!!! You will be forced to the off label Alpo. And, good God, think of what recent 'G Fund' returns (3%) will do to your retirement.

Why worry about 20 months when you are investing for more than 20 years? I would glue it in the 2030 till I gained more knowledge. At that point, personally, I would shade my holdings a little one way or a little the other way. That way you will always be able to take part in market gains that come along 'unexpectedly' (like our current unemployment numbers). For you, 'time in the market is far more important than timing the market'.

 

[esswun]

Thanks a lot for all the replies again.

Boghie, I really liked your examples given. Yes, that was what I was just trying to avoid was your example of loss in the L2030 vs G over the last couple months. I'm not going to just keep it in G until I retire because over the long term the L funds are going to perform better, I know.

Are there any indicators or rules of thumb I could use to know when to move money around? I primarily want to remain in the L funds and I liked the idea of 2020/2030/2040 based on bad/normal/good markets. If anything indicates that people's investments are going to tank, I can always shelter it in G for a few months which is what I'm doing now.

My question now is: what do I have to look for or learn about to know when to let it sit in a specific L fund, hide it all in G, or move it back to L? How do I know we're in a bad, normal or good market?

Again, I only moved to G because there were several news stories saying "OMG PEOPLE'S 401Ks ARE GOING TO GET KILLED! RUN FOR THE HILLS!" etc. Otherwise I wouldn't have even had a clue or even touched what I had in the TSP.