Re: [TSPStrategy] FWIW: What I am doing.

Tex, 

Not sure if you were being sarcastic but by no means were you intruding. I welcome opinions and value them greatly as I'm no investment expert. I just have been lucky to have had the opportunity to land a great paying job with the federal government coming from humble origins and making the most out it. 

For me it is indeed an impressive accomplishment but by my measurements and not comparing to anyone as mileage varies greatly and more likely than not, there are a very large number of TSP participants that have done far better than me and I am happy for them. Since this is an investing strategy forum I'm under the impression that this is sort of the topics that are discussed. Forgive me if I'm wrong. 

Thanks,

JP

On Friday, June 17, 2022, 8:09 PM, Locutusoftexas <mrweyl@hotmail.com> wrote:

JP, Impressive. You don't need anyone's opinion. Forgive me for intruding. Best wishes.

Herb, tough question if we include the allocation between G and S/C. It comes down to how much money one needs in order to live and to life expectancy, along with possibly supporting dependents. So that is actually a tougher calculation. I live a very low expense life style, although I am supporting some other people, so I am not a good point of reference.

First Point: If one is afraid of stocks, one should be true to oneself and do whatever one needs to feel safer. My personal assumption is that one is never safe anyway, life is short, and inflation is built into the system. So I would prefer to allocate to stocks, which will increase at least with inflation and probably faster than inflation over the long term. Someone will benefit, even if it is only your heirs. Grin and bear it and expect some psychic pain during bear markets. But above all, whatever I put in stocks, I keep in stocks.

All that being said, just the question of S or C is easier. If one looks ten years out or longer, my preference is pedal to the metal, so that would favor S over C. This is because smaller cap stocks perform better than large cap stocks over long periods of time. For say 10 years or less, it is probably a crap-shoot. On the other hand, the C Fund (S&P 500 Index) is the largest 500 stocks by capitalization and is updated a few times per year, as I remember. This means that companies in C which are declining should be replaced with better performers over time. To me that is a big advantage and I infer that the C Fund is potentially higher quality and less risky than S. So naively, I would offer the following very vague characterization of options:

I fund, probably okay, but I believe that US stocks are easier for me to trust, as long as our economic system continues to thrive.

10-year horizon or less: Stock allocation only (ignoring the G-fund allocation): (a) maximum potential for growth, i.e., pedal to the medal: S Fund; (b) allocation given the unpredictability of performance by large cap (C Fund), medium cap (in the S Fund) and small cap (in the S Fund) 50% C 50% S. (c) Risk averse allocation of stocks: 100 % C. None of these are bad and they all move together in a general way.

Greater than 10 year time horizon: (a) My preference: S Fund for maximum growth; otherwise: (b) Risk averse: C Fund.

20 years or more, if one is prepared to buy and hold: Stocks, stocks, stocks. 100% S would be my choice. Again C is somewhat higher quality in my opinion.

These are what I would do. S and C will perform similarly. Since I am now investing for my heirs, who know little about stocks, I am trying to move to the S&P 500 index ETFs or C Fund, since these are standard throughout the investing industry.

Good luck,
Tex

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