TSP F fund verses G fund
You can come close to predicting the future returns of the TSP F fund (Fixed Income) with some simple math. Because of the way they are designed, the TSP F fund performs better than the G fund only in a declining interest rate environment. If interest rates rise, the F fund can sustain capital losses while the TSP G fund's interest rate simply goes up. This is the key - the two funds react differently to changing interest rates.
Today the G fund's interest rate matches the F fund's yield. The only reason to invest in the F fund today is if you think you can time the market when the interest rate on 5-7 year duration securities is moving down, and then jump back to the G fund.
If you are a long term investor and not a speculator, there is little reason to allocate any funds to the TSP F fund. Take a look at the TSP Lifecycle fund – all of them. The highest allocation to the TSP F fund you will find is only 6.1% compared too much higher allocations to the TSP G fund. They get it.
My recommendation is to stick with the G fund when out of equities. Getting the equity fund timing correct will be much more critical to your TSP fund's performance.
You can read https://tspsmart.com/Compare-TSP-F-&-G-funds for more info.
Michael from TSPsmart.com
PS. I pulled data from the Lifecycle funds of TSP and Vanguard and produced some tables to see how they invest based on years-to-retirement. Take a look at TSP Allocation Percentage Guide if you have questions on how much exposure to equities TSP and Vanguard think you should have based on your age.
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Posted by: Michael Bond <michaelhbond@yahoo.com>
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Neither the TSP Strategy group, nor individual members, are licensed or authorized to provide investment advice. Any statements made herein merely reflect the personal opinions of the individual group member. Please make your own investment decisions based upon your personal circumstances.
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