Do you agree with this gentleman's take on the Lifecycle/G Funds?
April 2017 TSP Allocation and Business Cycle Analysis - TSP Allocation Guide
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Do you agree with this gentleman's take on the Lifecycle/G Funds?
April 2017 TSP Allocation and Business Cycle Analysis - TSP Allocation Guide
This Common Strategy Could Be Quietly Ruining Your Portfolio
By Dan Ferris, editor, Extreme Value
Wednesday, April 26, 2017
For decades, financial advisers have recommended putting 60% of your money in stocks and 40% in bonds. The conventional wisdom is that the safety and stability of bonds will protect you when stock prices fall.
Too many people believe stock and bond returns correlate negatively, meaning they reliably move in opposite directions.
But taking this tired advice could ruin you...
Christopher Cole at Artemis Capital Management – a hedge fund that specializes in volatility investing – busted the Wall Street "60/40 stock/bond" myth in an October 2015 research report called "Volatility and the Allegory of the Prisoner's Dilemma."
Cole looked at more than 132 years of data and discovered the correlation myth is false.
He writes, "The truth about the historical relationship between stocks and bonds is scary..."
Using data from 1885 through 2015, Artemis discovered that stock and bond prices have historically moved in the same direction roughly 70% of the time.
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Generally, I agree that L-Income (74% G & 6% F) & L2020 (54.3% G & 6.2% F) are way too conservative. I don't believe that stocks & bonds perform inversely to one another--when they do, typically the the change in bonds is much less than change in stocks. Valkyrie's article This Common Strategy Could Be Quietly Ruining Your Portfolio makes a few good points on the correlation & the advantage of holding cash (G Fund) to take advantage of market opportunities.
Short answer....it doesn't. If I understand which article you are referring to.
G Fund is not a bond fund. That would be our F fund.
As for the Lifecycle suitability, however, I think he is right on. It's a different topic, really. As I read it, he is saying that our Fed Pension is like the G fund. And it is. Your Pension will not go down, and once you start taking your Pension (that is, retire.) and are 62, you will get some COLA help to offset inflation.
So why put a large amount in G, if you already are taking a large % in Pension? Maybe your risk tolerance is low, so the Pension buffer against a large downturn in the stock market is not enough. As long as you realize that is what you're doing, that's fine.
But that is the reason I intend to stay relatively invested in retirement. Being in G for some 25 years in retirement (if I am to be so lucky), will be eaten alive by inflation.
As for Lifecycle Funds....they are definitely better than leaving your TSP in G during your working years. But when others ask me about Lifecycle, I recommend that if they want to do Lifecycle, they should push out the choice of fund another 20 years. If retiring in 2020, go to the 2040 fund. This will allow a more aggressive stance during working years and the first part of retirement.
I think I have said similar things before, under other circumstances. Bottom line is you just have to do something OTHER THAN leave your $$ in G. And for my own feeling, that includes during retirement. :theyareontome:
In my own case, for the first 20 years of work, I was in 33/34/33, C/S/I. Buy and Hold and Dollar Cost Averaging. It worked out well, as long as I did not watch it too closely and fret at the downturns (gotta think of those as buying opportunities when doing DCA!!). After 20 years, the amount going in per payday has very little affect against the total, so I moved more to going in and out as needed. That is also when I found TSPtalk, so that was good.
Thanks. I'm in a bit of a dilemma having transferred all funds to the G just prior to the presidential election. It had been in the C fund for 22 years, prior. So, I will likely retire in 2023, but am undecided as to an appropriate asset allocation at this point. I just moved 40% into the C and S, leaving the rest in the G. Should probably be more aggressive though.
It really depends on your risk tolerance. 6 years is still a lot of time to recover from a downturn....but you never know. I definitely think it is too early to be all in G. You might also want to try a Premium Service. Their prices are very reasonable, and you can always cancel out if it's not helping in your decisions.
Other than that, there are a lot of TSP'ers who post charts and offer suggestions without pay. Even TSPtalk himself posts a daily commentary. Hope this helps! GOOD LUCK!! :smile:
Yup. Should probably be a lot more aggressive especially before you retire. That will give you more to live on and more experience when you do retire but if you have been 100% C you have done well. You just missed the big rally since the election. So study, and there are good resources on this site. Make sure that you have a good TSP investment plan by the time you retire otherwise you will be too scared to invest and make money! :smile: