Opinions on my current allocation?

[OBGibby]

As of close of business on Thursday, 18Dec08, my account balance was approximately $xx,xxx, allocated amongst the following funds:

G - 5%
F - 5%
C - 48%
S - 21%
I - 21%

As background, I turn 33 in 2009. In 2007, I contributed approximately $x,000. In 2008, I contributed approximatey $xx,000. In 2009, I anticipate contributing $xx,500 (an anticipate maxing out for the next two to three years, if not longer). My agency matching contributions for 2008 will be approximately $xx,300. I also have an outstanding TSP loan which I will pay approximately $x,000 back each year in 2008, 2009, 2010, and 2011.

I'm currently a GS-13 and am eligible to retire in 2024 after 25 years of service, though I can continue to 2033, at which time I have mandatory retirement at age 57.

Considering that I have a minimum of 15.5 years left of contributing to TSP, and potentially 24 years to contribute, I am soliciting opinions about my current allocation as it relates to growing my account.

A couple of pay periods ago I changed my future contribution allocations to reflect:

G - 7%
F - 7%
C - 50%
S - 19%
I - 17%

- but left my current balance allocation untouched.

Am I sufficiently aggressive for the long-term? Your insight, opinions and general comments are appreciated.

 

[XL-entLady]

OBGibby, there isn't any one correct allocation for people in your particular situation. There are still a lot of intangibles, such as your level of risk aversion. And are you an investor or a swing trader. And so on. Your current allocation looks as reasonable as any for your age and timeline, but I'd strongly advise you to keep reading everything you can in order to educate yourself on the markets and the TSP. And this MB is an excellent place to begin! Welcome to the board.

Lady

 

[Birchtree]

The important question to ask now is how long will it take to achieve the previous high peaks in the CSI funds? The fund that is trading the cheapest right now is the C fund at $10.23 - you need as much of that fund as you can get while the prices are still golden. Forget about the G and F fund they are a waste of good capital and concentrate your leverage with the C fund. Your money will buy you more shares and you should pray that we grind and grind taking ample time to return to a price of $17.57 - but the risk is that we may just rocket up out of this hole with a vengence and you will not get the opportunity to DCA at the cheaper prices. But cycles tend to be repetitive and this opportunity will circle around again.

 

[KevinD]

Your insight, opinions and general comments are appreciated.

Your scenario would have been more fun had you made it about "your friend" instead of you.

 

[Show-me]

The important question to ask now is how long will it take to achieve the previous high peaks in the CSI funds? The fund that is trading the cheapest right now is the C fund at $10.23 - you need as much of that fund as you can get while the prices are still golden. Forget about the G and F fund they are a waste of good capital and concentrate your leverage with the C fund. Your money will buy you more shares and you should pray that we grind and grind taking ample time to return to a price of $17.57 - but the risk is that we may just rocket up out of this hole with a vengence and you will not get the opportunity to DCA at the cheaper prices. But cycles tend to be repetitive and this opportunity will circle around again.

If you are a buy and holder, this is the way to go. Welcome to the mb.

 

[ChemEng]

Forget about the G and F fund they are a waste of good capital and concentrate your leverage with the C fund.

There is no leverage with TSP.

 

[Birchtree]

What I meant by leverage was to use all contributed money into one fund - primarily the C fund. Assuming that kind of risk was my definition of leverage - get as many shares as possible while they are available. Dollar cost averaging golden prices is the redeemer of all buy and hold portfolios. Some of us like the C fund and some of us like the I fund - the name of the game is to accumulate shares which I notice you are doing aggressively on this current bottom.

 

[Pilgrim]

Even the mainstream media is catching on:

THE GURU'S CORNER
Buy and hold is dead

Commentary: And the trend really is your friend

http://www.marketwatch.com/news/story/The-trend-really-your-friend/story.aspx?guid=%7B91122BD0%2D309B%2D4DE9%2D8472%2D0616A33A200C%7D

 

[peterson82]

L2030 could be your friend!

 

[turbo23dog]

I'd consider the L funds too. Or, at least consider the allocations they provide and use those as a strawman allocation for what is best for you.

 

[Boghie]

OBGibby,

Personally, I never make new contributions to G and F funds. Your TSP is a tax advantaged 401(k) account. You don't get much of a tax advantage on funds that do not grow. And, as BirchTree noted, you are buying ON SALE right now. 50% off all stock funds When they rebound you will not pay current tax on the growth. Nothing better!!!

Now, on the assets you hold it is very different. There are traders here, there are buy and holders here, and there are reallocators here. I am probably an infrequent reallocator. However, even this blind sow sniffed out a frothy market acorn in late 2007 and moved assets to the G and F Funds. However, to prove my blindness I thought I could market time myself back into the stock funds in August just before the crash!!! My recommendation would be to read Ric Edelman or Ray Lucia and set up three asset allocation models. Set up one that is conservative that allows you to sleep in an October 2008 month. Set up another for the norm. And, maybe set up the last for when the market is - as the Fed Head says - exuberant... That concept helped me nap in October after I adjusted to conservative – even though I still had some assets allocated to C/S/I.

That isn’t a trader mentality. It isn’t a true buy and hold. It is something in the middle.

As you reach retirement age I would allocate more existing assets to the G and F Funds. I would never buy G and F assets with new contributions. At that point Ray Lucia’s ‘Buckets of Money’ would be exceptionally helpful. Basically, the G Fund should contain enough assets to handle your financial needs for 5 – 7 years with a complete drawdown. Your other allocations will then backfill it later.

 

[OBGibby]

Boghie -

Thanks for the advice. Last week I rebalanced and went to 60% C, 20% S, and 20% I, with corresponding future contribution allocations. I've got enought time left (15.5 years until full retirement eligibility, and up to 24 years until mandatory retirement age for my line of work).

 

[James48843]

OBGibby-

the trick is to LEARN as much as you can, as early as you can, and then come up with an approach that YOU are comfortable with.

Some people enjoy risk, and move more frequently.

Others are risk adverse, and are conservative in their approach.

Each is correct- if that is what THEY are comfortable with. No one here can tell you if you are right or wrong in your allocations. (Or at least they shouldn't be- none of us are professional investment advisors, nor do we play one on TV).

But the secret is to make your own moves, for your own account, based on the things you learn from others, so that you don't make the same mistakes.

My own model is very aggresive- I like risk. It works well for me in times of up markets. It has saved me some in the recent downturn, but I have also lost a lot.

But I am comfortable in knowing that I have avoided some of the mistakes I made in the crash of 1987, and the downturn of 2000-2002. So at least I am in a better position that I would have been otherwise.

That's the secret. Learn, learn, learn, and then do what YOU are comfortable doing.

Best of luck, and happy investing.

 

[OBGibby]

James -

Thanks. My original post/question is serving its' purpose by eliciting opinions and pros/cons from folks more knowledgable than myself. Always good to have second, third and many more opinions to confirm you're doing things right or give you that wake up call that all is not well.