wavecoder
Active member
that was a little before my time, crazy to think that buy and holding G fund coulda been an effective strategy some time ago
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Or you can now use TapaTalk again!Monthly return rate - G
- Thread starter Frixxxx
- Start date
that was a little before my time, crazy to think that buy and holding G fund coulda been an effective strategy some time ago
Boghie
Well-known member
Interest Rate: The current rate for new loans is 1.500%, which is the current G Fund interest rate.
Up .125%
Hey G funders...you makin some money now!
That seems to actually be a largish change. Has the Fed lost control of the gubmint Bond market?
JTH
Well-known member
Wow, that's an ugly chart with 6 concurrently down years, with the 1.5% loan rate I'd be tempted to take out a loan and apply it to my Roth IRA. :blink:
James48843
Well-known member
One thing that was done was a change in policy by the current TSP guru's Greg Long and Tracey Ray that MAKES ABSOLUTLEY NO SENSE WHAT SO EVER.
That is...the thrift board, UPON THE RECOMMENDATION OF LONG AND RAY, changed the type of "G" security duration they invested in.
Prior to the change (Which kicked in back around 2008, but I am not sure exactly when. You would have to go through the monthly meeting minutes, becasue it WAs discussed then.) Anyway, prior to the change, the "G" fund mostly invested in LONGER TERM TREASURIES with terms of 20 years or 30 years. The interest rate on long term treasury notes is significantly HIGHER than the interest on short term notes.
It's not actually a 30-year treasury note like other people can buy. It's a special treasury note made just for the TSP, that is only sold to the TSP by the treasury.
Even though roughly 186 BILLION dollars is parked now in "G" fund, and even though there has NEVER been less than 42% of the total value of all funds resting in the "G" fund, there was a discussion a few years back (2008?) that went like this-
"Q:Why are we invested in long term securities?
Answer: Because the rates are higher.
Q: What if everyone wanted "OUT" of "G" and went into stocks?"
Answer: Then we would have to sell some of the long term treasuries and cash them out to get the cash to buy stocks with.
Q: Doesn't that mean we'd take a slight loss if we had to sell before maturity?
Answer: Yes, but the likelyhood of having to do that is extremely remote. "G" fund has always, for 30 years, been the single largest fund of holdings for people.
Q: What would we have to do to ensure quicker liquidity?
Answer: We'd have to invest only in very short term maturities- like 90 days or less on new investments, where the rates are much, much lower.
Q: ok. From now on, let's only invest in very short term securities, in the odd event that we ever need to liquidate in a hurry. "
Answer: You wanyt us to change policy and stop investing in 30 year bonds, and 20 year bonds, and change to much shorter time maturities?
"Yes- just do it. "
So....that's why the "G" fund rates have plummented. Along with the long-term rates going down, the "TSP" baord directed that they now invest ONLY in short term government securities at a lower rate of return, rather than long-term securities.
Why? I don't exactly know, but I presume somebody is making a kickback off of it or something.
It makes no economic sense, but that is the formal policy in place right now for the "G" Fund.
CrabClaw
Well-known member
Boghie
Well-known member
James, Occam's Razor, Occam's Razonr
The 'G Fund' is not the 'F Fund'. It is more like a Money Market Fund with higher returns. And, do you really want to sell long duration bonds in a crashing bond market? To me, it is not a bad move. Most financial advisers are now recommending the purchase of short and mid-range bonds rather than the long term ones.
Frixxxxx,
That is not the best thing I have read recently. Two bumps in two months. I reiterate for the reading public:
Boghie
Well-known member
JTH
Well-known member
Thanks, I always forget to look it up, isn't this less than half of what it was in 2007?Similar threads
