Tex;
Thank you for your thoughtful and informative response. I am thinking that the market is down so much that I want to buy into C and S very soon. I hopefully don't need to take much out of the TSP except for RMD because of my age, so hopefully enough time to increase the stocks value.
Herb
On Fri, Jun 17, 2022 at 10:09 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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