Newbie w/?'s & Looking for a strategy

[yehiah]

Hi Everyone,

I'm new to TSP Talk and to investing in general so I'm still trying to get my head wrapped around all of this. I'm 26 years old, and have been with the feds about 2.5 years. All my money was in the G fund until recently when I put 70% into the L2040 and 15% into F and G. I know you need to take some risk to make gains, thus the 70% in L. But I also want to have some "secure" funds. My questions are 1) Is 70% too much to have invested in an L fund- is it too risky? and 2) What is the benefit of splitting your investments between the individual C, F, I, G and S funds, rather than putting the same amount in the L which combines all of these? and 3) Is there any way to protect gains? For example, if you own 30 shares and the price of those shares goes up from $14 to $19, is it possible and/or wise to move those shares out of that fund so as to avoid losses in the event the prices drop? I hear a lot about buy and hold, but don't exactly understand how you hold. Thanks! Any feedback would be greatly appreciated!!!

 

[alevin]

welcome yehiah. You're already so much more ahead of the game than I was at your age. You're doing fine for the moment. There are many strategies, much of it depends on your age and ability to tolerate risk. The longer til retirement, the more risk you can afford and tolerate. take your time here, look at the autotracker, see who the leaders are. find out as much as you can about why they do what they do when they change allocations. find out why they're willing to take the risks they take-personal circumstances, if they talk about those-years til retirement, other resources they have available to them, etc. When TSP is all you got, that's a whole lot different than when you already got a mil in the "bank" outside tsp. there's a few here that do. Most of us are somewhere in between at mid-career or later.

some of us aint near as close to where we need to be at this point in life due to lack of understanding of the markets when we were much younger and lived through other crashes in a not good way due to that lack of understanding and knowledge. You got the time and now you got the resources here to learn learn learn while you still got the time. welcome again.

 

[Birchtree]

The objective of your TSP account should be to accumulate as many shares as possible during your work history - and it takes a long time in grade to make progress. Unfortunately, you are now at a disadvantage because the days of C fund prices of $8, $9, $10, $11, $12, $13 are long gone and your contributions will buy fewer shares as prices escalate. But still there is opportunity. If you try to flip minimum shares you will get very discouraged. I would suggest putting all contributions in the C fund for the next several years - set it and forget it. If you want to play open a Roth IRA and buy individual stocks that pay good dividends - other wise stay tuned to this MB and learn as you go. Always learn before you churn. I recently helped my daughter with a Roth 401K as a new employee with her company - she will be buying every two weeks: Eaton Vance Large Cap Value fund, a 500 Index Fund and a Capital Appreciation Fund and I can guarantee you she won't look at it for years. We don't want these funds to go way up in value at this point in time - wait until there are multi-thousands of shares accumulated. TSP is the same way.

 

[Boghie]

I like Birch's strategy!!!

And, he knows it.

Yuk, yuk.




But - and there always is a but - I would split my paycheck contributions as follows:

C: 40%
S: 30%
I: 30%​

That way you might be able to catch some of these asset categories when they are down!!! Anything going into the 'I Fund' right now may benefit from share prices like that Birch mentioned. Yummy!!!

No contributions should go into G or F unless you are preparing an asset base to allocate into the other funds. My guess is that you are not ready for advanced tactics - or whatever...

 

[uscfanhawaii]

Let me also add my WELCOME to the boards! There are lots of smart people here so just paging thru the posts will give you lots of ideas. I applaud your initiative at an early time in your carreer!
I am also a newbie to posts, but have been lurking a long time. I have been in TSP since its inception. Splitting between C, S, & I is a good way to start. You don't know which one will take off next, so best to be in all 3. Since you are at the start, there is not much to be gained by being defensive....losses will rebound on their own. Once you build up a balance, then you may want to be more defensive.
But the biggest thing for those just starting out is to put as much in as you can afford! 5% is MINIMUM, since that is what you need to get all the matching funds from the gov't! But you can put in as much as $16,500 per year, all tax deferred. Thats a lot per year, but what I am saying is put in as much as you can. The dividends will be HUGE!

 

[Boghie]

USCFanHawaii just provided the optimum advice.
This chap might change my opinion of USC alumni

To clarify, just remember that any dollar invested in TSP doesn't cost you a dollar in take home pay! If your Federal and State tax rate (combined) is 30% in your top bracket than each dollar will cost you 70 cents.

So, $16,000 in contributions will cost you just $11,200 in take home pay!!! Just $430 per pay period!!! Actually, the Feds will match it to 5% of your salary so that yaks up the contributions - but in a good way. The free money will reduce your out of pocket contributions. Yummy. For example, if your gross pay is $40,000 than the Feds will give you $2,000 toward that $11,200 leaving you to find $9,200 (about $350 in take home pay per pay period).

If you can afford that you will have about $5.5 million. You will be a trust funder! Your children will be endowing universities and those universities will be placing a statue of you in the commons.

Or, you can stop investing in your retirement account(s) at age 35 and have a nice nest egg of $2.5 million to live on. I think you can suffer on $64,000 after tax income - before pension and social security and other investments - per year. That is, of course, inflation adjusted.

 

[nnuut]

Welcome yehiah. contribute as much as you can!!
Best of luck
Norman