Thread: 30 yrs to go, buy and hold new guy

Well, you have large caps, small caps, and international.

If you downplay international, you are ruling out MOST of your world-wide investment opportunities.

What you examine is each fund's past performance over a 30-year period and it's volatility. Use those to determine how much risk/reward suits you.

Being the black-and-white thinker that I am, at a glance, it is difficult to not want to just put everything in the biggest long-term gainer of all, begging the question: Which one will be worth the most in 30 years?

get2will,

Welcome. Now there aretwo of us buy-and-holders on the board!

Historically, the S & I funds are more volatile than the C Fund, i.e. more risky. However, they have also delivered higher returns, i.e. more risk =s more return (hopefully).

Unfortunately, the S Fund has a high correlation with the C Fund. Therefore, it doesn't provide very good diversification relative to C. On the other hand, the I fund has a relatively low correlation with both the C & the S. Therefore, it provides nice diversification for the other two.

Since the C & S funds represent the entire domestic stock market, many people, set the C & S percentages based on their relative market capitalization, i.e. approximately, 75% C and 25% S (you might want to check these percentages).However, if you want to turn up the risk (and the potential return), you can over weight S (but not eliminate C).

Although foreign stocks represent about 50% of the world market capitalization, most experts wouldn't recommend a 50% allocation. Most recommend 25-30% foreign.

Therefore, a standard domestic market capitalization strategy, with a relatively high dose of foreign stocks would give you:

53% C; 17% S; and 30% S.

Incidentally, as a long term buy-and-holder, you may want to consider some bonds. Theynon-correlate with domestic stocks, i.e. provide good diversification, and reduce portfolio volatility.

Three. :P

Et tu, Mike?

tsptalk wrote:

Et tu, Mike?

hahahaha

Don't forget Azanon! (Az...you still around?)

Tom and others, I simply cannot do a good job of being "active" in the trading realm at this time. My responsibilities at work have increased, and my hours continue to include substantial amounts of overtime. I simply don't have the time or energy to actively try to follow and time the market.

Hence, I'm on the 50 C / 30 S / 20 I automatic allocation. I'll tweak this periodically, depending on general trends.

Mike wrote:

Three. :P

Hey ----

I think I want to follow you. Can you show me the way?


Rolo informed me that my pics weren't coming through so I re-did them. Please anyone let me know if these aren't coming through. Thanks W_W

Exactly where would you like to follow me? :l

Looks like I'm a Buy & Holder too... Currently 40C / 40S / 20 I. 30yrs to retirement, unless the returns are riduculous and I can buy my private island!

Problem is... I feel like a day trader. I'm always reading everybody's comments, philosophies, predictions, and allocation changes. I'm updating my Excel spreadsheet almost daily... and I get worked up over daily movements up & down in the markets. Add to that, that I'm not business or market savvy; and I'm trying to learn from listnening & reading & observing.

All of this, and I'm new to Fed/TSP- started in Nov 2004!!!

Maybe I need to learn some relaxation techniques... or just stop looking at the markets and re-eval my distribution percentage once or twice a year!

Any suggestions? A scotch nightly does wonders.

By the way, how do I upload a personal image to "identify myself"?

Buy and holder number X

Personally, splitting equally between the 3 funds is a perfectly reasonable strategy over a 30 year time horizon (contribution allocations also equally split equally between the 3 funds). Rebalance annually to 1/3rd in each and forget about it.

However (I always have to throw in a fixed income argument), I would highly recommend a 75/25 allocation in your case (75 stocks split equally between the 3 funds, and 25% fixed incomeG/F, I prefer G). Why? Historically,one third of therisk as measured by standard deviation is eliminated while sacrificing 1/7th of the return of 100% stocks (75/25 historically nets 92% of the return of an all equity portfolio). Historically, maximum one year loss drops from around 50% to around 30%. Recommend that you read William Bernstein's "The intelligent Asset Allocator" and "The Four Pillars of Investing" both must reads for buy and holders. Also, Larry Swedroe's 2005 edition of "The Only Investment Guide You Will Ever Need." Swedroe's book is particularly germane to TSPers because he uses many risk/return examples of portfolios split equallybetween the 3 stock asset classesavailable to us. He uses a 60/40 allocation to demonstrate.

<<I'm new to Fed/TSP- started in Nov 2004>>

Don't you have to wait six months before you can contribute to the TSP? Or maybe you are military and things are different over there?

I definitely agree with the above about not comitting your entire portfolio to the stock funds. I bounce between40% and 60%. Last year with 40% in the C and S funds (60G), I about tripled my return over what it would've beenwith 100G. This year I was shooting for a 60% investment but recent events -- the terrible 1st quarter just ended -- have caused me to retreat for now.

What matters most is that you get your kitty started by maximizing your contributions. Take a few years, get the balance up there while holding risk to the minimum, then look for the right opportunity. Easily said, hard to do!

Dave