4.3% (projected for 2004 based on 2.9% YTD) a year return isn't going to get it done. Inflation has historically averaged at least 3%. In order to get higher returns youmust to take on higher risk, i.e. F/C/S/I funds. Taking on riskmeans your portfolio is going to periodically go up (like 2003) and down (like 2004 so far). However, a portion of that risk can be diversified away by investing across asset classes.
If you can time the market, i.e. move in and out of the highest performing asset classes to get the highest returns,stop working for the government. Did anyone know in January 2004 that the G Fund would beat all of the other fundsyear-to-date?I doubt it.Is the G Fundthe best place to be for the final four months of 2004? Who knows?Tom predicts equities will finish strong.I hope so. They wouldn't have to go up much to beat 4.3%.
If the government, the Congress,or TSP were to provide investment advice, they would advise employeesto allocateassets across all of the funds based on individualrisk tolerance, buy and hold, and periodically rebalance. They would not advisemarket timing or staying fully invested in the G Fund.In fact, the proposed "life cycle" funds representTSP's best investment advice to employees.It’s boring, but state-of-the-art.
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