New Federal Employee, what should I do?

[jonnycage]

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Ok, well not brand new. I started with the National Park Service when I was 25. Now Im almost 30. I have worked myself up too the 14% max within the last year. I have just under $18,000 in my TSP. I have at least 25 years till retirement. Anyone have suggestions on how to allocate? My training said for young people too dump into C fund. I was here yesterday and read the allocation suggestion, not realizing it was updated daily? So my funds are changed according to yesterdays suggestions. How many times can you switch? Any suggestions would be greatly appreciated.





JONNYCAGE:^

 

[Mr. Duke]

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I'm back in 100% I-fund ...probably effective Friday a.m. Sometimes this strategy makes you feel like a ground hog sticking its head out of a hole when there is a lot of shooting going on..

JonnyCage

Can't give much advice as to how to play your hand...everyone has there own strategies. When to get in and get out are major players. The only thing I can positively state is that people that just leave their money in the G-fund for their career are going to have a rude awakening come retirement time. Common practices are to buy low and sell high...Duh....however, most people can't seem to get out with a positive gain and end up watching the stock rise and fall without locking in a profit...I am no different. Timing is everything...but this last month has been especially difficult...You might get in and the stock falls...at that time I realize it is time to ride it out until I can pull off a profit...It might take 30 days..but to sell when down serves no purpose...Some times I just don't want to look....Everyones got an opinion, I am no different....Welcome to the Clan.....A lot of good info is shared here daily....

 

[tsptalk]

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Welcome jonnycage!
Your question requires a pretty broad and complex answer. I won't go intoright now because it could take me all night. Let's start out like this...

Timing the market isn't for everyone. Many people are down right against it. I'd suggest you tag a long awhile, read the daily market commentsand the longer term outlookcomments. Take a look around the site, formulate some questions and after a whileyou will get an idea of whattype of an investor you want to be.

When you have those questions,this message board is a great place for answers.

Thanks for joining us!
Tom

 

[Pete1]

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I would recommend that you start with the diversified portfolio listed on the returns page.

20% G

20% F

20% C

20% S

20% I

It seems too simple but it is very effective and it is a very solid default portfolio until you figure out if you want to market time or buy and hold.



After you have been around the board for awhile, you may want to adjust your allocation frequently in order to capitalize on short-termmarket opportunities(market timing) or you may want to continue with long-term buy and hold. If you choose to continue with buy and hold, your age suggests a time horizon of 35-40 years until retirement. In this case, many would recommend along-term buy and holdall stock portfolio split equally between C, S, and I. You would rebalance this portfolio infrequently back to the original allocation. For example, if after a year your account percentages had shifted to 40% C, 30% S, and 30% I, you would request an interfund transfer to make the percentages34% C, 33% S, and 33% I. You would be selling your C fund shareshigh and buying S and I low. Using the long-term buy and hold approach, your future contributions would also be split equally between C, S, and I.

 

[Guest]

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I agree with Pete I, 20% each is good for a person who is just starting to look at their TSP. personally, if you are 30 years old, you have anywhere from 20 to 35 years until retirement? I would Dollar cost average, that would be to put the set amount from each paycheck into the C and S fund, that is 50% each. I, too, am "new" to the TSP (only 5 months) and do not really trust the foreign markets (I fund), nor do I understand them as well. The C fund has returned around 11% average annually (going from the S&P as the guide) for the past 75 years. That means your money would double every 6.5 years. Is that enough for you to retire on? If it is, then go for it, place the same amount in every pay periord. and don't worry about it. I can't recall the performance of the Willshire 4500 the past 75 years (That is basically the S Fund). I believe that it has a better rate of return for the years they have been following it.

Now, what these people are saying also is: Are you Ok with the average rate of return, or do you need a higher rate of return to acheive the lifestyle you need for retirement? This is a HUGE question? You certainly have time on your side starting so young. Good for you!! If you need a higher rate of return, or want the freedom of trying to retire earlier (more towards the 20 year mark than the 35 year mark)then you need to do some sort of timing to try and outperform the market. In other words, trying to miss some of the lows in the market (ideally being in the F or G fund during the down times) and be in (The C and S) during the rises. That is what many of the people are doing here. Best advice: WATCH AND LEARN. That is what I am doing. If you consistantly see people underperforming the market averages while spendingA LOT OF TIME doing it, then don't do it yourself. That would be like gambling, in my opinion. I hope this helps. As I said, I am still learning myself. Humbly, Humbly Written:

Joel

 

[Rolo]

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All good advice. The thing about investing is that much of "what is best" is entirely up to the investor. Whatever you decide, have a clear-cut plan. Changing your plan is fine (encouraged), but always keep it clear. My biggest problem is starting out with a clear plan, waffling on it, and eventually not sticking to it and losing direction. I am my own worst enemy.

Anywho, it sounds like you may be a "buy-and-hold" kinda guy until you have the knowledge to do something differently. To that end, I recommend majority in S, the rest in I (66-S, 34-I, or 70/30, or even 80/20). Why? Small caps historically yield higher gains, as well as international stocks. Hopefully, the market is about finished with is downtrend, which makes S that much more attractive right now.

Numbers make for nice definitive pictures, too. I managed to find the historical return for the Wilshire 4500. By all means, check my work: I downloaded the monthly rate of returns since inception (Jan. '84)from here:

http://www.wilshire.com/Indexes/calculator/

...divided by the total number of months and multiplied by twelve for a total return of 12.36%. I could not find a historical average for the MCSI EAFE Index. The U.S. Stock Market as a whole is 10.4%. I think the S&P 500 (C Fund) is in the high 9's.

I would venture to say that70-S/30-I would yield the highest if you had forgotten about it over the next 20+ years. At a minimum, however, you want to keep an eye out for broad market trends and adjust accordingly, such as bonds being on a tear (go F Fund), tech bubble (get in on the madness in S, get out of equities entirely at climax with G Fund), etc.

Thomas Jefferson and Ben Franklin both said that the harder they work, the luckier they get. I believe that to be particularly true in investing.



I too am fairly new and following along. As it stands right now, however, I see no real use for the C Fund, and the G Fund is strictly for when none of the other funds look good and you need to stay in cash.