Asset allocation at TSP...

[rakendzior]

How diverse is your portfolio across the asset classes available at TSP? Thoughts?

[RazorCat]

I use one of the premium services available on here, so my allocations change from month to month. Members get periodic Buy and Sell signals. A Buy signal means you move to equities (C, S, or I), a Sell signal means you move to G or F. The frequency and length of signals vary based on system analysis of where it thinks the market is headed. Of course, a lot depends on you age, time left until retirement, and how much risk you’re comfortable with. Are you nearing retirement, or do you have a ways to go?

[kportra]

I'm 4 or 5 years out from retirement and am currently 50 C, 20 S, 10 F, 20 G. I struggle so much with the balance of protecting my balance and not wanting to miss gains.

[Boghie]

That is a high risk allocation for someone within five years of retirement.

Just guessing, but I would hanker that such an allocation would have lost 35% peak to trough in 2008/9.

Can you handle that? At what point would you rebalance? If you cannot handle it and have no rebalance plan than I would maybe do 50% in the market and 50% out of the market - and, some would consider that risky with a five year horizon. I remember losing 16% in two (2) days in October of 2008. I was actually +7% till then, got back into the market, and could not get out in time to avoid losing the 16%. Not a good time - and, I was 17 years from retirement then...

Why live in fear for 2% - 3% in annual gains at this point?

[kportra]

I agree it does seem a little risky, but my retirement date does not really coincide with when I'll need the money. The funds I have in G will carry me for roughly the first 5 years of retirement. I'm planning to keep G funded by rebalancing with the funds needed for the 10 year horizon and play with the rest knowing I will have some time to recover. I know that is riskier than some are willing to do.

[genod]

I'm a lurker but your post brought me out of the closet. That is a solid strategy that I know others use; and will be doing the same thing. I plan on keeping around 5 years of funds in G and the rest in C and S. Like you said, the market will recover. I've got 9 years to MRA and plan on making it my real retirement age.

[Boghie]

I agree it does seem a little risky, but my retirement date does not really coincide with when I'll need the money. The funds I have in G will carry me for roughly the first 5 years of retirement. I'm planning to keep G funded by rebalancing with the funds needed for the 10 year horizon and play with the rest knowing I will have some time to recover. I know that is riskier than some are willing to do.

I have heard this strategy called "Buckets of Money" - Ray Lucia.

I like it and plan on using it - or a variant. I think it is a smart way of doing business when your work income stops. It is kinda silly to consider money you don't need for a decade to be 'safe' money. And, with that kind of time horizon adjustments can be made along the way. Even a 2008/9 type of crash would not dramatically affect you.

I just thought you were a complete buy and holder. If that was the case than having such a large allocation in stock is dangerous because it is difficult to hang in there if it dumps 40%. But, if you still have three years of safe money than it is just the cost of doing business. And, anyone in these forums probably watches their assets more diligently than the Enron employees anyway...

[rakendzior]

Am responding to Boghie's remark that says "... high risk allocation for someone within five years of retirement". As almost always, IT DEPENDS. It depends on what other resources you have, on how long you expect to live, etc.
A mistake too often made is that 'retirement' is nothing more than leaving the workforce, meaning there has to be a fundamental shift in the way you live your life. Today, retirement is not so much an event, as a transition into what could very well be a 25 - 30 year trek into the future. Ideally, your first stage is what I call the GO-GO years where you have a bucket list of things to do, many of which means spending more money than you will in the next stage, the SLO-GO years. If you expect to have money to pay bills during that time, keeping a significant portion of your retirement assets fully invested in stocks is a must.