Thread: Great Fund

AB -

We've been having a similar discussion in the C fund Forum. It seems to pay to be more aggressive over the long term and invest in the stock funds. Although I use the G fund oftenwhen we are due for, or are in, a pullback in the market.

Here are the cumulative returns of each from from 1988through 2003. Of course the S and I funds were not available throughout this period butthe indices were.

G Fund F Fund C Fund S FundI Fund20% Each Fund

185.28% |239.06% |524.42%| 499.20% | 116.15%|311.69%

Two comments. The international fund did extraordinarilywell in the early and mid-eighties whichit is not included here. Also, the 1987 crash occurred shortly before these returns.

Tom

Also, you haveinflation risk with the G fund.

Can anyone tell me if they can figure out within a day or two, when the G fund pays out? It looks to be about 3 times a month.

I haven't been able to figure out the pattern exactly but I didn't put much time into it. As you probably know, if you get 5 or 6 days without an increase, it's a pretty good bet you'll see it in a day or two.

tsptalk wrote:

...if you get 5 or 6 days without an increase, it's a pretty good bet you'll see it in a day or two.

Yes, I love flat bases!

(Look at VLCCF for the past year.)

This acts like a short term bond fund but no principal risk. What's not to like. Even after I retire I am considering leaving some $ in this fund. Comments? Thnx.

The short answer is poor protection against inflation, and poor total return.

They are great for your "emergency fund". They are also great if you want a stabilizing part to your portfolio. However if 1. Your investment horizon is greater than 5 years and 2. Your not a market timer thenhonestly, i'd avoid it alltogether. I'd use F fund instead of G if you want less volatility, if you're looking to buy-and-hold.

Almost all sites that loosely speak of retirement diversification speak of stock/bond ratio. U.S. Treasuries are left out of that discussion for a reason.

I would consider the G fund "cash equivalents", likea really good Money Market Account. Using the connotation of the term, I do not consider it an investment.

There is a great site where you can play around with different risk levels and the TSP funds. It is called financialengines.com and was created by Nobel laureate William Sharpe. I have often punched in the F fund for the fixed component of a long-term buy and hold allocation and invariably, it recommends the G fund instead. For example, I just told it that my allocation is:

40C, 25S, 25I, and 10F and it recommended 35C, 30S, 25I, 10G. In other words, lower C fund, increase S fund, and get rid of F. The returns project out higher at the same risk level. But it seems to be a pattern where any time I indicate tha I am using F, they remove it and recommend G. Usually, financialengines is a fee service but since TSP has a limited number of funds, they are currently waiving the fee. Hopefully, this will not change.

I would consider the G fund "cash equivalents", likea really good Money Market Account. Using the connotation of the term, I do not consider it an investment.

Financialengines also categorizes G fund as cash.

Is financialengines a completly free service? I didn't quite understand the need for the agreement they were asking for, and about paying federal/state and local taxes?? Can you shed some light on this. Thanks

I'm not sure. The phone number is listed on the site and so, suggest you give them a call to make sure. They indicated to me that the fee was waived for TSP accounts but not for outside accounts.I was advised that I would need to upgrade for my outside accounts and so, maybe the tax questionsapply to outside accounts that you would receive advice for.