The Truth about the L-funds that the TSP Board should stress

[fedgolfer]

With the L-funds allocating 25%, 21%, and 19% to the L2040, L2030, L2020, funds (respectively), their returns are going to be greatly DIMINISHED during times of the strengthening US dollar.

The TSPTalk readers know how this greatly effects the I-fund.. but to the many unsuspecting L-fund holders, this is going to really eat into the equity gain portion of their asset allocation over the long haul.

If these funds were worth their weight in gold, they would take more than just time into redistribution allocations... the risk of the I-fund/dollar trade is just to great to blindly put money into these funds over the long haul. Buyer beware... we are in an upcycle of the dollar, and have been since mid-March of 2008.

http://quotes.ino.com/chart/?s=NYBOT_DX

[Bullitt]

Good points FedGolfer, I agree the dollar has been reverting to the mean since March 08. Two things to ponder with L Fund investors, which I know you and most TSP talkers are not.

1. Most folks investing solely in the L Funds are taking a 'passive' approach to investing. Their financial future isn't a concern for them yet. They would rather choose to add to the pool of liquidity and believe the company line that the market will continue to return 8% yearly over the next 100 years.

2. Even the L2020 Fund is long term by today's standards. Think about the L2040 fund and now you've got about a 30 year horizon. Yikes! By time investors are withdrawing from their 2040 Fund, there will probably be at least 5 more bear markets, 5 more bull markets and a few black swan events in between.

I'd be surprised if any L Fund investors even watched Jim Cramer. Not that that's a bad thing....

[kodaq2001]

I'm new with this whole TSP thing so I put my funds into L 2030. I have another 30 years until I retire so I'm not really concerned about all this economic trouble. My question is 'would it be better to allocate my funds manually or to just leave it in the L funds?'

[tsptalk]

Welcome to the site kodaq!

The L-funds are OK if you don't plan to be pro-active, but our slogan here is, "Friends don't let friends buy and hold". :)

[kodaq2001]

Thanks, its good to be here. I actually want to be proactive with my TSP but I really don't know how. I think I need to figure out what each fund is first, then figure out a plan of attack... I guess my main question is, how can you look at the market and determine which funds to put your money into?

[tsptalk]

1 - Read the message board daily
2 - Read the daily market commentary (www.tsptalk.com/comments.html (http://www.tsptalk.com/comments.html))
3 - Watch what the Tracker leaders are doing and saying (http://www.tsptalk.com/tally.html)

That's it! :)

Here is some info on the funds: www.tsptalk.com/funds.html (http://www.tsptalk.com/funds.html)

[kodaq2001]

i went into my tsp account to change my contribution allocation today. can you explain what interfund transfers are and why i would need to do that?

[Frixxxx]

i went into my tsp account to change my contribution allocation today. can you explain what interfund transfers are and why i would need to do that?

Interfund transfers allow you to change your positions in available funds.

If you are 50% C and 50% I, but you think bonds (F) are the spot to be in, you select the Interfund Transfer and change the percentages to reflect 100% F.

You need to change funds based only by what YOU feel is the best place for your money at that time. BEWARE: you can only make two transfers a month like that.

But the full skinny is located: http://tsp.gov/forms/tspbk08.pdf

Page 11.

[cbackous]

fodaq, i will suggest checking out peacefulgains.com

they have a newletter that is free with some good info, use as you would like, but as suggest, check the forums, news, and the other seccessful posters on here..

[kodaq2001]

Thanks for the help...i got my statement about a week ago and the L Funds just arent cuttin it. Its time to take control of this myself, and i'm about to sign up for this newsletter asap. I know there's a limit on these transfers, how often do you guys usual do it?

[KevinD]

This link shows how members of this site use their IFT's.

http://www.tsptalk.com/tracker/tsp_user_record_all.php

This link shows members "rank" based on their IFT's and how the funds performed.

http://www.tsptalk.com/tracker/tsp_user_balance_all.php

The IFT's may or may not be the moves that the member used in their actual TSP account.

[kodaq2001]

Nice, thats perfect! i think i'm starting to understand how it all works now. when people do their IFT's, do they usually reallocate into the same funds?

[KevinD]

Heres a link to the index(s) that each fund tracks. These are the same as the charts you see at the bottom of each page here on the site. In order C, S, I and F.

http://finance.yahoo.com/q?s=^gspc,^dwcpf,EFA,agg&d=t

The I fund has a lot to do with the dollar. I'm still trying to figure that one out.

The F fund has to do with bonds and their yield. Still working on understanding that one too.

http://www.investopedia.com/university/bonds/bonds3.asp

Some say that the small cap stocks (S fund) rise before the large cap stocks (C fund) during a recovery from a recession...heck if I know.

Theres a lot more to this than a couple of questions can answer. It's been quite a steep learning curve for me and I still don't know what the heck I'm doing. I'm just trying to answer as best I can because new people show up here all the time and ask the same general questions.

Read all the Account Talk threads.
Read the Day to Day Market Talk threads.

Read Tom's Market Comments every morning.
http://www.tsptalk.com/comments.html

Buy books about investing, follow links to articles. I like http://investopedia.com.

Hope that helps and good luck!