The Truth about the L-funds that the TSP Board should stress

[fedgolfer]

With the L-funds allocating 25%, 21%, and 19% to the L2040, L2030, L2020, funds (respectively), their returns are going to be greatly DIMINISHED during times of the strengthening US dollar.

The TSPTalk readers know how this greatly effects the I-fund.. but to the many unsuspecting L-fund holders, this is going to really eat into the equity gain portion of their asset allocation over the long haul.

If these funds were worth their weight in gold, they would take more than just time into redistribution allocations... the risk of the I-fund/dollar trade is just to great to blindly put money into these funds over the long haul. Buyer beware... we are in an upcycle of the dollar, and have been since mid-March of 2008.

http://quotes.ino.com/chart/?s=NYBOT_DX

[Bullitt]

Good points FedGolfer, I agree the dollar has been reverting to the mean since March 08. Two things to ponder with L Fund investors, which I know you and most TSP talkers are not.

1. Most folks investing solely in the L Funds are taking a 'passive' approach to investing. Their financial future isn't a concern for them yet. They would rather choose to add to the pool of liquidity and believe the company line that the market will continue to return 8% yearly over the next 100 years.

2. Even the L2020 Fund is long term by today's standards. Think about the L2040 fund and now you've got about a 30 year horizon. Yikes! By time investors are withdrawing from their 2040 Fund, there will probably be at least 5 more bear markets, 5 more bull markets and a few black swan events in between.

I'd be surprised if any L Fund investors even watched Jim Cramer. Not that that's a bad thing....