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swsop
12-21-2005, 01:48 PM
Dailey Briefing from GovExec.com
December20,2005 (http://www.govexec.com/admin/news/index.cfm?mode=Edit%20Article&articleID=33046&)

Many investors in the Thrift Savings Plan's life-cycle funds are tempering their effectiveness by continuing to invest in traditional stand-alone funds too, officials said at a board meeting Monday.

The 401(k)-style retirement savings plan for federal employees life-cycle funds in August. The funds automatically move from a more aggressive to a more conservative mix of investments as participants approach their target retirement dates.

But TSP officials said they are finding that 55 percent of participants still have money in at least one of the five stand-alone funds too. The life-cycle funds were designed to hold the entire balance.

The most striking number may be this: 16 percent of life-cycle investors also have money in all five of the TSP's stand-alone funds. Those funds are the government securities (G) fund, fixed-income securities (F) fund, common stocks (C) fund, international stocks (I) fund and the small- and mid-sized companies (S) fund.

Six percent of life-cycle participants also have money in four stand-alone funds, 11 percent have money in three, 9 percent have money in two and 13 percent also have money in one additional fund.

One of the primary reasons TSP officials developed the life-cycle option was to wean participants from their overdependence on the G fund. That fund has no risk because its returns are guaranteed by the government, but it also doesn't offer an opportunity for the high returns that are important to funding a comfortable retirement.

Participants still seem attached. Of investors with one stand-alone fund in addition to the life-cycle option, 74 percent were in the G fund.

That instinct is understandable, said Andrew Saul, chairman of the TSP board.

"[The G fund] is such a great investment, let's be honest," Saul said. "It gives you such a great rate at no risk at all. So you'll always have more investors in the money market than you would in other plans."

There is another reason the G fund may still be popular, said Gary Amelio, executive director of the TSP. For new participants, the first month's assets go directly into the G fund regardless of fund selection. Participants might unknowingly be keeping one month's investments in that fund.

TSP officials said they will consider sending targeted educational mailings to investors who are using the life-cycle funds improperly.

The good news is that 95 percent of life-cycle investors are putting their money into just one of the five life-cycle options, as intended. The TSP offers distinct life-cycle funds for federal employees planning retirement around the year 2040, 2030, 2020, 2010 or in the next few years. Employees are meant to choose the one that most closely matches their target retirement date.

Participation in the life-cycle funds has been very strong. To date, about 214,000 investors have poured $7.3 billion into the funds. In less than five months, those figures already have surpassed the TSP board's goal for the first year.

swsop

bkrownd
12-22-2005, 11:00 PM
Heaven forbid that people might want to make their own allocation decisions! :shock: ;)

Sr
12-22-2005, 11:31 PM
swsop wrote:
Dailey Briefing from GovExec.com
December20,2005 (http://www.govexec.com/admin/news/index.cfm?mode=Edit%20Article&articleID=33046&)


TSP officials said they will consider sending targeted educational mailings to investors who are using the life-cycle funds improperly.
In this computer age and TSP automation, all they have to do is to honestly report in particiapnts year end statement how much the investment returned for them in that year. Depeding on allocation and amount contributed, even the lazy one can read the one line summary, But notice, this feature is absent for all the talk of investor education.

bobby
12-28-2005, 05:31 PM
Hi! I have 10 % in the c fund ,Im 53 ,have about 90,000 in it. Should I go to the L fund? Should I increase it to 15%,I m not to good at this. help!

rokid
12-28-2005, 06:06 PM
That would be my recommendation, i.e. put all of your TSP money in the appropriate L Fund. Choose the L Fund that most closely matches thedate that you wouldstart taking funds out ofTSP. It could be your retirement date. On the other hand, it could be a later date.

mlk_man
12-28-2005, 06:28 PM
Bobby, my advice is keep watching here and make your own decision. It's your money and you'll get all kinds of advice and\or ideas. It's your money, do what's best for you........

rokid
12-28-2005, 08:06 PM
mlk_man wrote:
Bobby, my advice is keep watching here and make your own decision. It's your money and you'll get all kinds of advice andor ideas. It's your money, do what's best for you........
Agreed. However, it should be an informed decision.

If you're inclined, read:

1. "A Random Walk Down Wall Street" by Burton G. Malkiel

and/or

2. "CommonSense on Mutual Funds"by John Bogle, the founder of the Vanguard Funds.

If you're not inclined to become heavily involved in managing your TSP account,TSP management has established the L Funds to provide a state-of-the-art,diversified, passiveretirement investment.

Note thatthe majority of participants on this site advocatemarket timing and technical analysis. On the other hand, almost all studies, the books cited above, and TSP management advocate diversified, passive investment as the best approach for reaching your long-term retirement goals, i.e. something that looks like the appropriate L Fund for your situation.

Finally, check the end-of-year Tally that comes out in a few days to see how the two approaches, market timing and passive investing,compare results-wise.

Sr
12-29-2005, 06:21 PM
rokid wrote:
TSP management has established the L Funds to provide a state-of-the-art,diversified, passiveretirement investment.


I agree it is as state-of-the-art as you can get but I really wonder how true it will be over the next 20 years because since the days of original MPT and pension fund management, many things have changed. As Dr. Swensen of Yale endowment has demonstrated, hedge funds play a big part these days. Asset classes like gold,oil, emerging markets, International Real estate and junk bonds are playing much larger part in the market activities these days. TSP L20XX funds just made up of US stocks, Old european stocks, bonds and G funds, diversified as they may seem, are not all the needed mix for an optimum portfolio over the next 20 years. I do not have data to says so with certainity and many will disagree. TSP seems to disagree for sure. But then, if you have a hammer, all you look for are the nails. If all you have is 5 asset classes, that is all you will claim one needs in an ideal portfolio. Still, L20XX funds are much, much better than doing "market" analaysis with S&P daily charts and moving in and out ofS,Cand the G funds. That is fort sure. It is like looking out on the harbor dockfor the airplanes taking off from the airport.

bkrownd
12-29-2005, 06:32 PM
Sr wrote:

TSP L20XX funds just made up of US stocks, Old european stocks, bonds and G funds, diversified as they may seem, are not all the needed mix for an optimum portfolio over the next 20 years.


If so, the same criticism applies TSP as a whole. However, I think that the TSP offerings are probably adequate for the average person, which is all it's really trying to achieve. Everyone should have a Roth IRA and additional savings outside of TSP for further diversification.

yakers
01-12-2006, 05:18 PM
I am 55 and had a 40% G and 20% S, I & C before the L Fund came out. I picked the L2020 and all my new contributions go there as well as a transfer from another IRA into my TSP. The L fund is about 25% of my TSP. I don't see any reason to change my other TSP funds and hold only the L Fund. This "dilution" leads to almost exactly the AA I want currently 38%G, 20%I, 18%S and 24%C with just a smattering of F (<1%). But the fund will migrate towards the L fund AA as more funds are added and if I transfer in the last old IRA I have outside the TSP. I finally found an AA I like and I'm sticking to it. I'm going to "don't just do something--sit there". I will check my TSP regularly but I plan to rebalance annually or maybe even not at all.