Re: [TSP_Strategy] Re: Dollar cost Averaging Within TSP for Retirees

 

There are multiple Lifecycle Funds. It looks like the percentages you mention are the L Income Fund, which is 74% in G, 6% in F and 20% in equities (C S I).

L2020 - 56% G, 6% F, 38% C/S/I

L2030 - 33% G, 6% F, 61% C/S/I

L2040 - 20% G, 6% F, 74% C/S/I

L2050 - 12% G, 5% F, 83% C/S/I

https://www.tsp.gov/InvestmentFunds/FundOptions/fundPerformance_L2050.html (click tabs for other funds).

Mike

On Thu, Sep 7, 2017 at 5:22 PM, Michael Bond michaelhbond@yahoo.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:

 

Flyingjed

You asked an interesting question and it really got me thinking.  I have been wanting to compare some of the more common investment strategies discussed by investors and dollar cost averaging is one of them. So I did a little research and found a lot of conflicting information.  I guess I should not be surprised, but it motivated me to write a post on the subject (link below for the full answer and some other thoughts). 

The shorter answer is that your idea may have a lot of merit depending on your objectives and assumptions about the market.  If you believe as I do that the market is over-valued and now is an "opportune time" to move to the G fund then need a way to begin moving back into the market later, it has a lot of merit.

On the other hand, dollar cost averaging is not an investment strategy as many seem to think and you still need a risk-mitigation strategy to protect nest egg from large losses – which I define as market risk.  If you are following the TSP Strategy Group as your investment strategy, that is fine but you should allocate the percentage to equities based on your years to retirement and not go 100% with the group.  

The professionally managed TSP Lifecycle funds only allocate 20% to equity funds for retirees, 6% TSP F fund and 84% to the TSP G fund.  So if you are over-allocated to equity funds for your situation it would be another reason now is an opportune time to move to the G fund. You just should not dollar cost average back to a very high allocation later.

The longer discussion is posted here  https://report.tspsmart.com/2017/09/07/dollar-cost-averaging/

Cheers,

Michael Bond

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Posted by: Mike VanAmburgh <mjv325@gmail.com>

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