Thread: The TSP Will Start taking Flack for L-Fund Losses

Originally Posted by tsptalk

My experience from running this site... people do not like to lose money. I have no doubt that there are people in the L-fund who believe that someone is managing their money and that they are protected from losses when in reality we know the L-funds are only as good as the market is doing - give or take the G and F returns.

When people start seeing their balances dropping after being talked into these funds, the TSP is going to hear about it.

In general, people don't read the small print, they don't understand the risks, and underestimate the losses that they can incur. I have a pretty good idea what the TSP is about to go through. Expect some busy signals on the thriftline next month.

I sure hope you're right Tom, but from just talking to a couple of folks here in the office that use the L Funds, they rarely if ever check their accounts and actually believe that the L Funds will be adjusted to protect them against such draw downs. When told this wasn't the case, they were mad and shocked of the money they'd lost, but they are just part of the great clueless class of Fed investors, when it comes to how the TSP works. But at least they understand what a couple of us TSP'rs, here in the office has been trying to tell them.

CB

What would they have to complain about? The L Funds have not done as poorly as 100% exposure to equities during this period of decline. They might not do as well either in a strong market, but they seem a good alternative to me for people who don't have an interest in or knowledge of investing.

Well, the problem is, LIncome is supposed to be a safe investment for retirees. Not so safe these days (if you are invested in 2040 it is supposed to be let the buyer beware to some extent).

If the L-Funds were a true DCA investment vehicle, there wouldn't be a problem. The recurring rebalancing of funds within them doesn't seem to do them any justice. JMHO.

If they don't know their exposure to equities when in an L Fund, they need to get "edumacated". But also, when invested in say, the L2040, it is highly invested in stocks for the long term... this is just a bump in the road to someone who isn't planning to touch their TSP for another 30 years.

And I am impressed with the returns of the L funds even in the down markets. The addition of the F fund and the daily rebalancing seems to offer decent protection compared to other alternatives.

I knew from watching that the L's did pretty decent in the up markets. But I am more impressed with how they hold up with those balances in the down days too.

As I said several times before- It takes a lot of work to be better than the L funds. It can be done, but it takes work to do. for a true Buy-and-Hold lemming they perform pretty dog-gone well.

I think Tom is right, however, for those uninformed that money goes obth ways- up and down. When they peek at their next quarterly statement, they may start asking questions.

Which in my book is good. They NEED to ask questions, and learn. It's THEIR money.

Originally Posted by tsptalk

My experience from running this site... people do not like to lose money. I have no doubt that there are people in the L-fund who believe that someone is managing their money and that they are protected from losses when in reality we know the L-funds are only as good as the market is doing - give or take the G and F returns.

When people start seeing their balances dropping after being talked into these funds, the TSP is going to hear about it.

In general, people don't read the small print, they don't understand the risks, and underestimate the losses that they can incur. I have a pretty good idea what the TSP is about to go through. Expect some busy signals on the thriftline next month.

And now they want the L funds as a default instead of the G fund? Instead of "de-fault" they will be asking "whose-fault?"

Originally Posted by SkyPilot

And now they want the L funds as a default instead of the G fund? Instead of "de-fault" they will be asking "whose-fault?"

Otherwise known as "Let the Buyer Beware" "But I didn't buy it!". Putting someone else's retirement money into an investment with risk is going to get people upset. Especially when new hires are mostly going to be L2040's. G should be the default, it doesn't lose money. Risk of any kind should be up to the investor.

Originally Posted by Silverbird

Otherwise known as "Let the Buyer Beware" "But I didn't buy it!". Putting someone else's retirement money into an investment with risk is going to get people upset. Especially when new hires are mostly going to be L2040's. G should be the default, it doesn't lose money. Risk of any kind should be up to the investor.

There's also risk in the G Fund - inflation risk. The young, new hires should be going into the L 2040. ------Jim