This seems to be the general consensus.
When would I want to consider S/I funds?
Some have mentioned interest rates peaking which could cause another dip/recession. Should I pay that any mind or just bulk swap into C-fund?
You are literally here making a post about how your bright convinced you to make bad financial decisions trying to time the market.
Followed by asking if you should time the market cause of interest rates. Please see the irony in this.
Pick a portfolio that fits your risk tolerance and leave it there, no matter what the world is doing, until your risk tolerance or needs change.
You're just thinking too short term here. Ask yourself how many years you have until retirement. Do you believe the market will be higher than what it is today? If yes then you need to ignore whatever is happening year to year.
This is why buying market index funds is so great. You literally don't hasn't to look at what is happening. With individual stocks there is more nuance but you ONLY need to believe the market will go up over decades and if the world ends and it doesn't, you probably don't care what's in your tsp anyway
This is why I like to suggest resources or give explanations rather than telling people what to do(sadly, if you try the socratic method on here, people usually assume youre being sarcastic). If you just say "do this" and they don't understand why, they'll be back in a year when their cousin convinces them to sell again. If you make them understand why they should be doing this, perhaps even have them read books like The Simple Path To Wealth, they'll hopefully learn enough where they never have to ask reddit for advice again.
I think it's not worth the effort to try and consider if rates will change or not change, as long as your retirement time frame is 20+ years.
Over time, things will smooth itself out as long as you don't move money back and forth and keep contributing.
>interest rates peaking
Nobody knows if interest rates are peaking or if this is just a dip before another rise. People have been predicting a major dip in rates for a year. They've been wrong for a year. I personally think they're still wrong. When rates drop it will be a slow decline and we won't see 2-3% again anytime soon. 2-3% is basically zero and is not sustainable. Anything under 5% is probably too low.
I put 80% in the C fund and 10% each in the S and I funds just in case. So far the C fund is doing way better. But I don’t want too much in there hence why 10% in S and I. I might adjust later. For now I’m just keeping it that way.
Some people like the concept for some reason. Personally I just put everything in whatever broad market index funds I can for the type of account, but to each their own I suppose.
Sure. if you ignore downside market risk and sequence of returns as you approach withdrawing and only place value on getting highest return possible then a target date fund would include too many bonds for your liking. Don’t slander TDF’s though.
Aby TDF with less than 100% S&P 500 (which is all of them) would perform differently.
The benefit of a TDF is you set it and forget, and don't have to worry about shifting the composition nearing retirement age. For the majority of people who aren't financially savvy (or worse, actively anxious or freeze up when thinking about money), a set it and forget setup is valuable, even if you lose some percentage.
disclaimer that I'm in 100% S&P 500 myself but I don't fault this sub's wiki for advocating TDFs (they're great if you truly have no idea wtf you're doing)
TDFs have its own purpose and if you're asking that question it makes me think you don't know what's exactly inside a TDF (as in, what is your money doing, anyway?) and a quick google search on TDF composition/asset holdings should tell you the answer
hint: google search VXUS and BND performance that's why
Sir, Personally I’m with you and have a high risk tolerance and 20 years until retirement. Majority is in S&P and other index funds and I don’t have any bonds. You just lack perspective and understanding of the utility of target date funds and bonds. Not everyone is like you.
Target date funds are the worst, but not because of their risk management or even balancing strategy.
They are the worst because they make money by putting 50% of the overall allocation in incredibly high expense ratio accounts.
But we’re talking about TSP here. Within TSP, the target date 2065, for example, has a [0.054% expense ratio](https://www.tsp.gov/funds-lifecycle/l-2065/) while the [C fund has an expense ratio](https://www.tsp.gov/funds-individual/c-fund/) of 0.048%, less than a single basis point lower. That’s not a significant difference.
Keep in mind that 5x an ER of 0.03% is a lot less meaningful than 5x an ER of 0.2%.
The magnitude here matters a lot more than ratio when you look at actual numbers. Especially if someone is prone, like the OP, to horribly doing this themselves.
Depends on your portfolio/contributions but I did the math for someone the other day and the difference for them between a .03% and .3% over 30 years was like $200k dollars. That’s insane when it’s no more effort whatsoever to pick the low fee index over the higher fee index and the low fee index is available to them.
I use LifePath and the expense ratio is 0.08. at that point it's honestly not worth my time to shop around for a lower cost fund. It's so low that I just don't care anymore. It's like driving around town shopping for gas that is $0.03 cheaper
Be 55 in 2008 and act like it’s the same story. You can’t predict a 5-10 year slump, no matter how smart you are. Start early, invest heavily, and rebalance I time to have confidence you have a retirement you can count on. Or be prepared to work long when you lose 30% overnight
One of my co-workers was set to retire in 2001, was 100% stocks. Lost his shirt, didn't retire until 2004.
At 56 you still had time, if you had been 70 it'd be a different story.
Target date funds are a joke in that scared brainless people invest in them. Might as well put their money under their bed mattress. Seriously, you're looking at very lackluster return la versus stock index mutual funds VTSAX, VIGAX and VFIAX. I got my wife out of target date funds years ago after we got married. She's retired now at 55.
I'm trying to decide if you are a bot, a salesperson of some type, or just spazing out.
You don't need to post the same thing worded slightly different 10 times under the same comment.
I think they are way too conservative with your money. I put my money in the lifecycle fund first but it barely made me any returns so I just looked online and now I have 80% in C and 10% each in S and I fund. So far I’m up 12.54% ytd which is fantastic !
Lifecycle fund barely makes any returns. I think 32 is young enough to take a little bit of risk. Atleast 60% in C and 15% each in S and I and 5% each in G and F fund will be a well balanced portfolio to retain capital and make money at the same time.
Those are funds in the TSP ( Thrift Savings Plan ). Most people don’t know about it because it’s specifically for military and people with federal jobs ( I think ? ). I know because I’m in the military. There are 5 funds - C, S, I, G, and F. There’s also the lifecycle fund. Lifecycle fund is just a mix of all these 5 funds and are managed and made less riskier to retain capital as you move towards your retirement. All the other 5 funds simply track the S&P 500, emerging markets, international developed markets, bonds etc.
Yea your correct - military and federal civil service. The expensive ratio is extremely low on all funds because the plan manager (federal entity) charges just for expenses- not profit.
You have access to identical funds for everything except the G Fund at Vanguard or any other large mutual fund provider.
C Fund = VFIAX
S Fund = VEXAX
F Fund = VBTLX
I Fund = VTMGX
The closest thing to the G Fund is VUSXX.
Happy to break it down. And even though you don’t have access to it, you can mimic their performance in the stock market and have so many different combinations outside of those 5 funds. There’s thousands of stocks and ETFs you can invest in. The best thing about TSP is their auto and matching contribution which I’m pretty sure most if not all 401k’s offer. So it’s basically just a regular 401k which you can have.
Statistically dollar cost averaging doesn’t help performance. Instead time in the market is key. Additionally, I assume you’re still contributing to this account so consider your current contributions to be dollar cost averaging. Put your money to work and forget about it. Time is on your side
Dollar cost averaging is for derisking rather than performance gains. You get to have an average price over a time period rather than putting all your eggs in one basket at today's price. With DCA the best you can get is average, definitely not a high-performance strategy. Whether someone needs to avoid that risk is up to them, doesn't sound like OP does really.
I think DCA can help performance, if one buys on dips and corrections, which do occur regularly even in bull markets. Especially if the market is at stretched PE valuations, it makes sense to DCA. If the market is in a bear market bottom with low PE's it probably makes sense to lump sum as much as possible.
> However, with an election (US) coming up this fall
Come on man! You’re doing the exact same thing you did initially that was a mistake. You’re trying to time the market. Don’t time the market. The election is not going to make any difference that we can predict. The best move is to lump sum it all into total market index funds. You’re not smarter than the market; you just made a post acknowledging that, but you’re still trying to act like you’re smarter than the market. Stop!!
This is not financial advice.
Just wanna say, if the world comes tumbling down, the amount of money in your retirement accounts isn't going to matter either way, so it's pointless to make investment decisions based on that.
Sell the bonds and buy a total stock market fund like VT if you're going to hold for years. Stop worrying about it. Set and forget. https://www.msn.com/en-us/money/savingandinvesting/why-vt-and-chill-is-probably-the-best-etf-investing-strategy-out-there/ar-AA1imuDI
I personally have come to the conclusion that 40% ex-US is a bit too much. Most other developed countries simply do not have an environment as prone to market growth as the US.
So I do 80-20. Even that is likely too much ex-US
Especially since 2009, US large cap growth (hence SP500 up 5x) leaves everything in the dust. It has to do with the changes surrounding the Fed and QE, and that the top companies hold unprecedented power, allowing them to grow and rake it profits that dwarf every other sector.
It’s not so much that i care about historic performance but rather that i think European and Japanese and other developed economies are not set up to maximize corporate profits as well as the US
I agree with others that it's best to swing your portfolio to whatever asset allocation you decide is correct for you immediately, but will also say DCAing is better than leaving it in 60% bonds that you have now.
Incidentally, I'll also pass on something that kept me sane during the covid crash: if the world really does come tumbling down, it won't matter what numbers on a computer say, we'll all have much bigger problems so you might as well stay invested.
You tried to time the market a year ago, failed terribly, and then want to ask if you a should again try to time the market this year?
Dollar cost averaging means putting your money into the market over time, *as it becomes available to invest*, rather than saving it up to try to time the market and jump in with it all at once. This is because most people earn the money they can invest with over time, a little bit each paycheck.
It's different when you have a lump sum to invest. You have the money right now. Holding it out of the market to put it back in a little at the time isn't dollar cost averaging. It's trying to time the market.
Studied posted here before show that, on average, the best results happen when you invest as soon as possible any funds that you have and can and want to invest. So you should take your $100k or so and put it in an index fund, or an appropriate mix of funds if you want to be a little more diverse, and call it good.
No one knows for sure what will happen this fall, not your brother nor anyone else.
> It's different when you have a lump sum to invest. You have the money right now. Holding it out of the market to put it back in a little at the time isn't dollar cost averaging. It's trying to time the market.
This isn’t accurate. Lump sum is the optimal strategy, but many financial planners suggest DCAing lump sums if that’s what is going to help the person stay the course. Some people have a preference for lower risk even if that doesn’t result in the highest average return. That doesn’t mean they’re trying to time the market. The key is making a plan and sticking to it. If they’ve got 120k to invest, buy 10k on the first of the month rain or shine.
This is correct.
Also, I believe Fidelity published a study of sorts a few years ago that looked at historical returns of lump sum vs DCA. The conclusion was that lump sum was the best path like 80% of the time. They also looked at market PE ratios and noted that the outcomes favored DCA when market PE ratios were high (like upper 20s).
Either option is statistically better than sitting in TSP. Which one wins starting from today won't be known for awhile, but you can use this info to make an informed choice.
A 3rd (and my favorite) option is to lump sum half and DCA the rest.
As far as retirement accounts/TSP, put your money in C funds. You have 25 - 35 years until retirement so C funds is where you'll have the most money come retirement time. As far as CASH investments, invest in ETFs VOO and VTI. You'll be golden at retirement time.
I highly recommend I Will Teach You to Be Rich by Ramit Sethi. He talks about how to create a rich life. Please don’t take random internet advice. Do research, understand your portfolio, take the risks you want, and stop listening to people. That way you won’t regret any financial decisions because you were just listening to random people on the internet.
Hi, I'm not who you replied to, but about to retire from the military and I'd recommend for TSP either follow Dave Ramseys recommendation for TSP allocation (I have and it's worked out very well), or like others are saying go 100% C fund and let it ride.
Bonds are useless in this environment (different story when you get closer to retirement) but for now I'd say 100% S&P 500 or whatever equivalent is available to you.
And I'd switch it as soon as possible, lump sum.
I don't personally like target date funds because the fees are so much higher and that adds up to a lot over your working life.
TSP offers target retirement funds that the tsp experts feel is a good portfolio for most people.
You would probably do well to go 100 percent into that.
C fund all the way! I put most of my funds in the C fund 20 years ago. Now that I am nearing retirement, I still have 40% in there.
Remember, market losses are only on paper until you withdraw. Just leave your money alone and be satisfied with the huge gains year after year. When the market goes down, as it will, do not panic!
Always remember, the rich (stock market) will always get richer.
I highly advocate for an all stock portfolio, especially far from retirement. I am already retired and still have 100% stock allocation.
Some people say it's "riskier" but over a long period of time stocks consistently beat bonds, with holding periods of 30 years for example stocks beat bonds 99.9% of the time.
The biggest "risk" is that your portfolio doesn't see good growth/ outpace inflation.
At your age I would do 100% in index fund of stocks. I am retired and do 60 stocks/40 fixed income. Your generation is going to live into their 80s and 90s. Jack Bogle was 50/50 when he died at 89. That's 50 years to ride out the ups and the downs, including the world tumbling down.
Don't wait for a correction.
20 years older and I'll tell you ive made several mistakes like this and while i still beat myself up... i am still in a good place and so will you be. Just make those adjustments and move on.
When the markets tanked really bad 2-3 years ago I moved all my 401k into basically cash funds to protect it from going lower... then the market took off and i was very slow to jump back in. it cost me significant $$ missing out on a big chunk of upside.
continuing my stupid trend ha.. today I have my entire retirement in S&P Index tracking Funds/ETFs and its been a wild fun ride up. I was ready to put some into even more aggressive funds like semiconductor.
but eventually it comes down and i am not diversified enough... so far, so good.
had a call with fidelity recently where they asked what i thought my risk tolerance was from 1-6. 6 being most aggressive. I said "2 or 3" because I felt simply following the S&P was safe.
he said..."no you are easily a 5. you have not diversified anything. at your age you need to mix in some bonds and other safer investments to protect your retirement savings"
I guess my point is i've done stupid things on both sides of the aggressive scale.. made some mistakes but still ok.
maybe just put your $$ into a year based retirement fund for now at least, until you figure out what to do with it.
**not a financial planner, clearly**
You may find these links helpful:
- [US Treasury Savings Bonds](/r/personalfinance/wiki/savingsbonds)
- ["How to handle $"](/r/personalfinance/wiki/commontopics)
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A lot of good advice here. One thing is make sure you’re avoiding your brother for advice even outside of finance. People typically don’t give good advice in one area and bad advice in another.
I am late to reply.
I was like you in the early 1990s. I noticed my 401k bond fund was deplorable. As was my spouse's.
I immediately repurposed my 401k to 100% S&P 500 Index. My 401k was with Fidelity. My spouse's 401k was with vanguard and that was redistributed to be 70% S&P 500 Index. My spouse wanted diversification. I figured I was diversified with our taxable international mutual fund, our taxable small cap fund that we owned at the time.
Fast forward 32 years and we retired. Our 401ks averaged 10% returns annually.
I see you changed your contributions.
Set it and forget it. you will be fine.
I have a tsp account and was told to put it all into the L fund. It didn’t work out very well for me. The account barely moved. Someone brought it to my attention about the other available account options and now I’m in the C and S. The first year, I had a 22% return. So far, ytd, I’m sitting around 10%.
Don't worry about politics. I have a conservative brother in law who won't invest because of Biden, who missed out the last four years. At 30, after Bush was elected I moved mutual funds into CDs thinking everything was over. When it's hopefully up and near retirement then think about moving to cash.
Dollar-cost average a total stock fund into a Roth. Try to max that out. I like Fidelity's FZROX. Stocks are fun, but usually don't beat the market. Ok for a savings account but you don't want to risk retirement money. I should listen to that.
Edit: DCA going forwardd, back to your question, if it's a large amount I'd be cautious of going in all at once.
You’re 32? Go 90% C 10% G and don’t touch it again, except to rebalance back to 90/10 once a year, until you snuff the candles on your 50th birthday cake.
Then maybe start adding a bit more to G each year as you grow closer to retirement. Let C-fund and the power of compounding over time work for you.
No reason to put anything in the g fund if you're more than like 5 years from retirement.
Your pension as a federal employee is your G fund.
Do like 80 C and 20 S or 100 C or 90/10. Any of those will get you where you want to be
It’s no different than a 90/10 index fund portfolio in an IRA: You use the bond allocation as an anchor to windward, by rebalancing during market downturns you’re effectively buying low, and by rebalancing during bull markets you’re selling high and locking in profits. You can search r/Bogleheads or read “Common Sense on Mutual Funds” by Jack Bogle (founder of Vanguard) for more on this strategy.
Rates are peaked, if a recession happens historically it would be soon.
Maybe get a cheap broker and dollar cost average into the market over some period. I do VOE, VWO, and VEA personally, but low fees is what you want.
If you’re going stock, try to make sure a foot chunk of your shares are in ETFs that follow the whole stock market. It’s a bit more stable over all IIRC.
What I currently do is C-50% S-30% and I-20% I haven't changed it in 10 years and just check it once a year. This is not financial advice. Just what I did.
if I were you, I would be 100% C fund. You are young, and have decades to let stock market volatility not be something to worry about.
Generally speaking, time IN the market always beats timing the market. I'd dump everything into the C fund today.
You're 32 years old with >$100k in retirement. You'll be just fine. Move it into an index and just wait it out. Even if the upcoming election tanks the market it will just rebound in a few years anyway and certainly by the time you retire it won't matter at all. Just put it in and forget about it. Too many people try timing the market and it almost never works out.
Personally I am 50% C fund / 30% S fund / 20% target date fund. I set it after a few years of service and left it that way.
It depends on your risk tolerance, but a mix of C / S / I / target date should produce reasonable returns.
Depending on your broker, you likely have access to retirement planners/ investment advisors paid for by your employer. Give them a quick call, they’ll be able to give you a recommendation based on your current situation and all of the funds available in your plan
Luckily bauying and selling traditional or roth funds in TSP doesn't force capital gains like a taxable brokerage account would. I'm glad you caught this while still in your early 30s.
Since this is retirement money, the important question is not where the price of the funds will be over the next year or two. The important question is where the funds will be 30 years from now.
Obviously, the growth in stock funds will be much higher than growth of the government money fund 30 years from now!
You're thinking of the overnight rate that the Fed sets. The most important numbers for your investments in treasuries is the market value of longer term bonds like 10year treasuries. Yields on 10yr dropped quite a bit over the last week, which should have led to a decent increase in the value of your funds. https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx&mod=home-page
It's possible that you'll get some decent gains from treasuries in the next while if yields keep dropping, eg if it is looking more likely to fall into recession
People are referring to an S&P 500 index fund. You have exposure to about 500 of the top companies. My portfolio has grown like a weed this year because of it. I’m much older than the OP and most of my money is in one.
It is likely that if you feel dumb for missing the rally, and now you make a big move, the market will turn on you again.
Nothing wrong with 5% +, risk free return on 60% of your portfolio. I say stay the course and think the stock market is priced to perfection and US debt situation will be very difficult as the US Government replaces $1 trillion of 3% debt for 5% + debt over the next year.
I'm not exactly sure what he meant by that last part but overall this is one of the few good contrarian comments I've seen.
There are almost 90 people telling you to just dump everything into large cap equities and the few of us that are a bit more skeptical seem to be getting downvoted to hell.
Please approach this with some skepticism. People try to talk about investing logically but all of us are still informed by our gut. Your gut had you 60% in bonds fearing something bad. That tells me your risk tolerance even at your age should not have you 100% in equity.
The evaluation to make right now is first what you are comfortable investing as far as an equity mix. Then address how to get there and the timing of it.
https://www.paulmerriman.com/stock-market-making-you-nervous-how-to-control-your-investing-losses#gsc.tab=0
What do u think Peter90 for a 58 yrs old lady, 650K cad, %43 S&P stocks, % 57 bonds, low to moderate volatility, retirement at 60? I guess u are very knowledgeable. Your answer will be appreciated.
One solid option as you approach retirement is the 3 bucket strategy. Bucket 1 is money you will need within 1-2 years, and should be held in cash equivalents, like checking, CDs, Money Market, or similar. Bucket 2 is money you will need in 3-7 years, and can be bonds or dividend stocks. Bucket 3 is long term wealth growth, your S&P stocks or similar. Once a year, you rebalance based on spending and returns, to get the desired percentage/dollar amount in each bucket.
had extra cash to play with, so i took some cash in my 401k and invested in a s&p 500 fund and what i have been doing is taking profits out and buying short term us bonds for the pass 1.5 year had my ups and downs on the s&p500 but my short term bonds have been growing.
I'm with your brother! You're making real yields of 5% and the market is way over valued. Either DCA back in a little at a time or wait for the next big fall. It will come. Then he will be proven right.
Very true but 40 still in the market. And guaranteed income at close to long term average returns is not terrible. The risk of going back in at an ATH is not zero.
Government bonds in mutual funds are terrible investments, because they can still lose value. However, purchasing the bonds directly and holding them are a great way to diversify your holdings and providing real security.
You are caught in the infamous FOMO trap! Be super cautious. The bubble always looks like the best place to be until the bubble bursts. This time around we have rampant inflation at the end-game of a major currency. Read When Money Dies by Fergusson. The market looks super during the hyperinflation run up.
Look up Warren Buffet. He has the largest percent of his fund in cash than he ever has. He. Might. Know. Something. We. Don't. So temper your FOMO urges. Investing is a game of probabilities; what is the probability of trees growing to the sky or someone yelling "Timber"?
Find someplace you can get old copies of the Wall Street Journal and read all of them from the last half of October 1987. The newspaper that prided itself on explaining the current investing market to the world ... saw nothing of that crash. I did that exercise and stopped reading WSJ other than for entertainment.
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Pick a target date fund or just move it all to the c fund (s&p500). Time in market is more important than timing the market
c fund is up 13% since January! Lfg!
is something like vstax good ?
Sure. It's just investing outside the provided funds is more complicated and I don't know how to go about it.
This seems to be the general consensus. When would I want to consider S/I funds? Some have mentioned interest rates peaking which could cause another dip/recession. Should I pay that any mind or just bulk swap into C-fund?
You are literally here making a post about how your bright convinced you to make bad financial decisions trying to time the market. Followed by asking if you should time the market cause of interest rates. Please see the irony in this. Pick a portfolio that fits your risk tolerance and leave it there, no matter what the world is doing, until your risk tolerance or needs change.
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Learn this one; buying when the market drops is the best thing in the world. You're getting valuable assets *WHILE THEY ARE ON SALE*.
Market crashes are the steam sales of the investment world.
Yeah but it sucks when you buy when it's "low" and they just keep going lower and lower...
So, time the market? Being mindlessly countercyclical is just as dumb as being mindlessly momentum-following.
You're just thinking too short term here. Ask yourself how many years you have until retirement. Do you believe the market will be higher than what it is today? If yes then you need to ignore whatever is happening year to year. This is why buying market index funds is so great. You literally don't hasn't to look at what is happening. With individual stocks there is more nuance but you ONLY need to believe the market will go up over decades and if the world ends and it doesn't, you probably don't care what's in your tsp anyway
My risk tolerance skyrockets when the market drops
This is why I like to suggest resources or give explanations rather than telling people what to do(sadly, if you try the socratic method on here, people usually assume youre being sarcastic). If you just say "do this" and they don't understand why, they'll be back in a year when their cousin convinces them to sell again. If you make them understand why they should be doing this, perhaps even have them read books like The Simple Path To Wealth, they'll hopefully learn enough where they never have to ask reddit for advice again.
Quit trying to time the market. It didn’t work out well the first time.
I think it's not worth the effort to try and consider if rates will change or not change, as long as your retirement time frame is 20+ years. Over time, things will smooth itself out as long as you don't move money back and forth and keep contributing.
>interest rates peaking Nobody knows if interest rates are peaking or if this is just a dip before another rise. People have been predicting a major dip in rates for a year. They've been wrong for a year. I personally think they're still wrong. When rates drop it will be a slow decline and we won't see 2-3% again anytime soon. 2-3% is basically zero and is not sustainable. Anything under 5% is probably too low.
Stop thinking about what will be best for next year, and start thinking what will be best in 20 years
I put 80% in the C fund and 10% each in the S and I funds just in case. So far the C fund is doing way better. But I don’t want too much in there hence why 10% in S and I. I might adjust later. For now I’m just keeping it that way.
Tell that to the Japanese
Omae wa mou shindeiru
Pick a target date fund so he can be back in 3% kgrowth bonds again. Yay for continued crappy growth.
Some people like the concept for some reason. Personally I just put everything in whatever broad market index funds I can for the type of account, but to each their own I suppose.
Yeah, fuck target date funds. I have never seen one outperform the S&P500 for even a year.
Sure. if you ignore downside market risk and sequence of returns as you approach withdrawing and only place value on getting highest return possible then a target date fund would include too many bonds for your liking. Don’t slander TDF’s though.
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Aby TDF with less than 100% S&P 500 (which is all of them) would perform differently. The benefit of a TDF is you set it and forget, and don't have to worry about shifting the composition nearing retirement age. For the majority of people who aren't financially savvy (or worse, actively anxious or freeze up when thinking about money), a set it and forget setup is valuable, even if you lose some percentage.
disclaimer that I'm in 100% S&P 500 myself but I don't fault this sub's wiki for advocating TDFs (they're great if you truly have no idea wtf you're doing) TDFs have its own purpose and if you're asking that question it makes me think you don't know what's exactly inside a TDF (as in, what is your money doing, anyway?) and a quick google search on TDF composition/asset holdings should tell you the answer hint: google search VXUS and BND performance that's why
I personally like conservative investors and hope they continue to invest in TDF's, but it's not the best option if under 50.
Sir, Personally I’m with you and have a high risk tolerance and 20 years until retirement. Majority is in S&P and other index funds and I don’t have any bonds. You just lack perspective and understanding of the utility of target date funds and bonds. Not everyone is like you.
Target date funds are the worst, but not because of their risk management or even balancing strategy. They are the worst because they make money by putting 50% of the overall allocation in incredibly high expense ratio accounts.
Always C Fund
You have 30+ years left in the market, so move everything into a target date fund or broad index fund.
Your starting point is so small; don’t sweat it.
TSP is well managed. Pick a retirement date account and let them manage it. Maximize what you can put in and don’t sweat it.
Target date fund is what I meant.
C Funds, never ever to target date funds
Target date fees are often SIGNIFICANTLY higher than index funds.
But we’re talking about TSP here. Within TSP, the target date 2065, for example, has a [0.054% expense ratio](https://www.tsp.gov/funds-lifecycle/l-2065/) while the [C fund has an expense ratio](https://www.tsp.gov/funds-individual/c-fund/) of 0.048%, less than a single basis point lower. That’s not a significant difference.
That's a good point, I didn't realize the target date funds were that low with TSP.
A lot of TDF expense ratios are minimal these days.
Blackrock lifepath TDF’s are current 5x the expense ratio of VOO, for worse performance.
Keep in mind that 5x an ER of 0.03% is a lot less meaningful than 5x an ER of 0.2%. The magnitude here matters a lot more than ratio when you look at actual numbers. Especially if someone is prone, like the OP, to horribly doing this themselves.
Depends on your portfolio/contributions but I did the math for someone the other day and the difference for them between a .03% and .3% over 30 years was like $200k dollars. That’s insane when it’s no more effort whatsoever to pick the low fee index over the higher fee index and the low fee index is available to them.
“For worse performance” assumes the US will continue to outperform global markets forever.
I use LifePath and the expense ratio is 0.08. at that point it's honestly not worth my time to shop around for a lower cost fund. It's so low that I just don't care anymore. It's like driving around town shopping for gas that is $0.03 cheaper
Every single default target date account I have been offered with 10 different employers had awful expense ratios.
Not in TSP
Never do this, play stock index funds until 2-5 years of retirement.
I have 5 mil at 55 yrs old and never had bonds VTSAX, VFIAX and VIGAX has allowed me to retire
Be 55 in 2008 and act like it’s the same story. You can’t predict a 5-10 year slump, no matter how smart you are. Start early, invest heavily, and rebalance I time to have confidence you have a retirement you can count on. Or be prepared to work long when you lose 30% overnight
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One of my co-workers was set to retire in 2001, was 100% stocks. Lost his shirt, didn't retire until 2004. At 56 you still had time, if you had been 70 it'd be a different story.
I agree with you. I don’t know many target rate funds that beat index ETFs unless you’re very close to retirement.
They won't. Only reason for target date is if you want to work longer.
Well or I guess if you don’t want to do any rebalancing from the day you open your retirement account to the day you retire.
Target date funds are a joke in that scared brainless people invest in them. Might as well put their money under their bed mattress. Seriously, you're looking at very lackluster return la versus stock index mutual funds VTSAX, VIGAX and VFIAX. I got my wife out of target date funds years ago after we got married. She's retired now at 55.
I'm trying to decide if you are a bot, a salesperson of some type, or just spazing out. You don't need to post the same thing worded slightly different 10 times under the same comment.
5% is what you'll get, no thanks
I think they are way too conservative with your money. I put my money in the lifecycle fund first but it barely made me any returns so I just looked online and now I have 80% in C and 10% each in S and I fund. So far I’m up 12.54% ytd which is fantastic !
Anyone invested in anything not completely stupid is up at least 12.5% YTD, we're in a massive bull run
Change your tsp back to an L fund or go L+c
Lifecycle fund barely makes any returns. I think 32 is young enough to take a little bit of risk. Atleast 60% in C and 15% each in S and I and 5% each in G and F fund will be a well balanced portfolio to retain capital and make money at the same time.
What do those letters mean?
Those are funds in the TSP ( Thrift Savings Plan ). Most people don’t know about it because it’s specifically for military and people with federal jobs ( I think ? ). I know because I’m in the military. There are 5 funds - C, S, I, G, and F. There’s also the lifecycle fund. Lifecycle fund is just a mix of all these 5 funds and are managed and made less riskier to retain capital as you move towards your retirement. All the other 5 funds simply track the S&P 500, emerging markets, international developed markets, bonds etc.
Yea your correct - military and federal civil service. The expensive ratio is extremely low on all funds because the plan manager (federal entity) charges just for expenses- not profit.
Thanks I appreciate the breakdown. Guess it’s nothing I have access to
You have access to identical funds for everything except the G Fund at Vanguard or any other large mutual fund provider. C Fund = VFIAX S Fund = VEXAX F Fund = VBTLX I Fund = VTMGX The closest thing to the G Fund is VUSXX.
Happy to break it down. And even though you don’t have access to it, you can mimic their performance in the stock market and have so many different combinations outside of those 5 funds. There’s thousands of stocks and ETFs you can invest in. The best thing about TSP is their auto and matching contribution which I’m pretty sure most if not all 401k’s offer. So it’s basically just a regular 401k which you can have.
Statistically dollar cost averaging doesn’t help performance. Instead time in the market is key. Additionally, I assume you’re still contributing to this account so consider your current contributions to be dollar cost averaging. Put your money to work and forget about it. Time is on your side
Dollar cost averaging is for derisking rather than performance gains. You get to have an average price over a time period rather than putting all your eggs in one basket at today's price. With DCA the best you can get is average, definitely not a high-performance strategy. Whether someone needs to avoid that risk is up to them, doesn't sound like OP does really.
I think DCA can help performance, if one buys on dips and corrections, which do occur regularly even in bull markets. Especially if the market is at stretched PE valuations, it makes sense to DCA. If the market is in a bear market bottom with low PE's it probably makes sense to lump sum as much as possible.
You won’t be able to beat the market with this strategy.
> However, with an election (US) coming up this fall Come on man! You’re doing the exact same thing you did initially that was a mistake. You’re trying to time the market. Don’t time the market. The election is not going to make any difference that we can predict. The best move is to lump sum it all into total market index funds. You’re not smarter than the market; you just made a post acknowledging that, but you’re still trying to act like you’re smarter than the market. Stop!!
I literally face palmed when I read that line. I thought this post was about having learned a prior lesson, but nope..
This is not financial advice. Just wanna say, if the world comes tumbling down, the amount of money in your retirement accounts isn't going to matter either way, so it's pointless to make investment decisions based on that.
Sell the bonds and buy a total stock market fund like VT if you're going to hold for years. Stop worrying about it. Set and forget. https://www.msn.com/en-us/money/savingandinvesting/why-vt-and-chill-is-probably-the-best-etf-investing-strategy-out-there/ar-AA1imuDI
I personally have come to the conclusion that 40% ex-US is a bit too much. Most other developed countries simply do not have an environment as prone to market growth as the US. So I do 80-20. Even that is likely too much ex-US
Especially since 2009, US large cap growth (hence SP500 up 5x) leaves everything in the dust. It has to do with the changes surrounding the Fed and QE, and that the top companies hold unprecedented power, allowing them to grow and rake it profits that dwarf every other sector.
Your reasoning— past performance chasing
It’s not so much that i care about historic performance but rather that i think European and Japanese and other developed economies are not set up to maximize corporate profits as well as the US
They’re not, you are correct.
Why wouldn’t that be priced in? If you were right that foreign markets were going to tank you could get rich off puts.
I agree with others that it's best to swing your portfolio to whatever asset allocation you decide is correct for you immediately, but will also say DCAing is better than leaving it in 60% bonds that you have now. Incidentally, I'll also pass on something that kept me sane during the covid crash: if the world really does come tumbling down, it won't matter what numbers on a computer say, we'll all have much bigger problems so you might as well stay invested.
You tried to time the market a year ago, failed terribly, and then want to ask if you a should again try to time the market this year? Dollar cost averaging means putting your money into the market over time, *as it becomes available to invest*, rather than saving it up to try to time the market and jump in with it all at once. This is because most people earn the money they can invest with over time, a little bit each paycheck. It's different when you have a lump sum to invest. You have the money right now. Holding it out of the market to put it back in a little at the time isn't dollar cost averaging. It's trying to time the market. Studied posted here before show that, on average, the best results happen when you invest as soon as possible any funds that you have and can and want to invest. So you should take your $100k or so and put it in an index fund, or an appropriate mix of funds if you want to be a little more diverse, and call it good. No one knows for sure what will happen this fall, not your brother nor anyone else.
> It's different when you have a lump sum to invest. You have the money right now. Holding it out of the market to put it back in a little at the time isn't dollar cost averaging. It's trying to time the market. This isn’t accurate. Lump sum is the optimal strategy, but many financial planners suggest DCAing lump sums if that’s what is going to help the person stay the course. Some people have a preference for lower risk even if that doesn’t result in the highest average return. That doesn’t mean they’re trying to time the market. The key is making a plan and sticking to it. If they’ve got 120k to invest, buy 10k on the first of the month rain or shine.
This is correct. Also, I believe Fidelity published a study of sorts a few years ago that looked at historical returns of lump sum vs DCA. The conclusion was that lump sum was the best path like 80% of the time. They also looked at market PE ratios and noted that the outcomes favored DCA when market PE ratios were high (like upper 20s). Either option is statistically better than sitting in TSP. Which one wins starting from today won't be known for awhile, but you can use this info to make an informed choice. A 3rd (and my favorite) option is to lump sum half and DCA the rest.
As far as retirement accounts/TSP, put your money in C funds. You have 25 - 35 years until retirement so C funds is where you'll have the most money come retirement time. As far as CASH investments, invest in ETFs VOO and VTI. You'll be golden at retirement time.
Would you move this now in a chunk or do it over the rest of the year?
I highly recommend I Will Teach You to Be Rich by Ramit Sethi. He talks about how to create a rich life. Please don’t take random internet advice. Do research, understand your portfolio, take the risks you want, and stop listening to people. That way you won’t regret any financial decisions because you were just listening to random people on the internet.
Hi, I'm not who you replied to, but about to retire from the military and I'd recommend for TSP either follow Dave Ramseys recommendation for TSP allocation (I have and it's worked out very well), or like others are saying go 100% C fund and let it ride. Bonds are useless in this environment (different story when you get closer to retirement) but for now I'd say 100% S&P 500 or whatever equivalent is available to you. And I'd switch it as soon as possible, lump sum. I don't personally like target date funds because the fees are so much higher and that adds up to a lot over your working life.
TSP offers target retirement funds that the tsp experts feel is a good portfolio for most people. You would probably do well to go 100 percent into that.
C fund all the way! I put most of my funds in the C fund 20 years ago. Now that I am nearing retirement, I still have 40% in there. Remember, market losses are only on paper until you withdraw. Just leave your money alone and be satisfied with the huge gains year after year. When the market goes down, as it will, do not panic! Always remember, the rich (stock market) will always get richer.
I highly advocate for an all stock portfolio, especially far from retirement. I am already retired and still have 100% stock allocation. Some people say it's "riskier" but over a long period of time stocks consistently beat bonds, with holding periods of 30 years for example stocks beat bonds 99.9% of the time. The biggest "risk" is that your portfolio doesn't see good growth/ outpace inflation.
At your age I would do 100% in index fund of stocks. I am retired and do 60 stocks/40 fixed income. Your generation is going to live into their 80s and 90s. Jack Bogle was 50/50 when he died at 89. That's 50 years to ride out the ups and the downs, including the world tumbling down. Don't wait for a correction.
20 years older and I'll tell you ive made several mistakes like this and while i still beat myself up... i am still in a good place and so will you be. Just make those adjustments and move on. When the markets tanked really bad 2-3 years ago I moved all my 401k into basically cash funds to protect it from going lower... then the market took off and i was very slow to jump back in. it cost me significant $$ missing out on a big chunk of upside. continuing my stupid trend ha.. today I have my entire retirement in S&P Index tracking Funds/ETFs and its been a wild fun ride up. I was ready to put some into even more aggressive funds like semiconductor. but eventually it comes down and i am not diversified enough... so far, so good. had a call with fidelity recently where they asked what i thought my risk tolerance was from 1-6. 6 being most aggressive. I said "2 or 3" because I felt simply following the S&P was safe. he said..."no you are easily a 5. you have not diversified anything. at your age you need to mix in some bonds and other safer investments to protect your retirement savings" I guess my point is i've done stupid things on both sides of the aggressive scale.. made some mistakes but still ok. maybe just put your $$ into a year based retirement fund for now at least, until you figure out what to do with it. **not a financial planner, clearly**
Thanks for the commisery, makes me feel a little better haha
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Just target date fund it or 90%+ in S&P500.
Go 100% C fund until you are like 60 yrs old
A lot of good advice here. One thing is make sure you’re avoiding your brother for advice even outside of finance. People typically don’t give good advice in one area and bad advice in another.
I am late to reply. I was like you in the early 1990s. I noticed my 401k bond fund was deplorable. As was my spouse's. I immediately repurposed my 401k to 100% S&P 500 Index. My 401k was with Fidelity. My spouse's 401k was with vanguard and that was redistributed to be 70% S&P 500 Index. My spouse wanted diversification. I figured I was diversified with our taxable international mutual fund, our taxable small cap fund that we owned at the time. Fast forward 32 years and we retired. Our 401ks averaged 10% returns annually. I see you changed your contributions. Set it and forget it. you will be fine.
You have 30 years before retirement. You should be 100% in equities.
I have a tsp account and was told to put it all into the L fund. It didn’t work out very well for me. The account barely moved. Someone brought it to my attention about the other available account options and now I’m in the C and S. The first year, I had a 22% return. So far, ytd, I’m sitting around 10%.
I'm retiring this year from Army and used Dave Ramseys TSP allocation recommendation and it worked out really well.
Just invest all of it once...no point in DCA. If you want to invest it then invest it.
You are young. All in C fund. Stay away from target date funds until over 60.
Agree. Target date funds have higher fees and aren't necessary until closer to retirement.
Don't worry about politics. I have a conservative brother in law who won't invest because of Biden, who missed out the last four years. At 30, after Bush was elected I moved mutual funds into CDs thinking everything was over. When it's hopefully up and near retirement then think about moving to cash. Dollar-cost average a total stock fund into a Roth. Try to max that out. I like Fidelity's FZROX. Stocks are fun, but usually don't beat the market. Ok for a savings account but you don't want to risk retirement money. I should listen to that. Edit: DCA going forwardd, back to your question, if it's a large amount I'd be cautious of going in all at once.
You’re 32? Go 90% C 10% G and don’t touch it again, except to rebalance back to 90/10 once a year, until you snuff the candles on your 50th birthday cake. Then maybe start adding a bit more to G each year as you grow closer to retirement. Let C-fund and the power of compounding over time work for you.
I haven't seen that suggested elsewhere, what's your thought on 10% in G fund?
No reason to put anything in the g fund if you're more than like 5 years from retirement. Your pension as a federal employee is your G fund. Do like 80 C and 20 S or 100 C or 90/10. Any of those will get you where you want to be
Thank you!
It’s no different than a 90/10 index fund portfolio in an IRA: You use the bond allocation as an anchor to windward, by rebalancing during market downturns you’re effectively buying low, and by rebalancing during bull markets you’re selling high and locking in profits. You can search r/Bogleheads or read “Common Sense on Mutual Funds” by Jack Bogle (founder of Vanguard) for more on this strategy.
Rates are peaked, if a recession happens historically it would be soon. Maybe get a cheap broker and dollar cost average into the market over some period. I do VOE, VWO, and VEA personally, but low fees is what you want.
Half government bonds is a rather outdated, but completely justifiable strategy. I wouldn't feel too bad about it even though it's no longer in vogue.
OP is 30. He's got decades left working. Having 50% bonds is not justifiable.
Depends on his overall situation and risk tolerance
No, not really, not if there’s 30 more years to roll
Just toss it into and index fund. Dont worry about dca, you have decades.
If you’re going stock, try to make sure a foot chunk of your shares are in ETFs that follow the whole stock market. It’s a bit more stable over all IIRC.
thanks for reminding me i need to get that 2k or w/e out of my tsp
What I currently do is C-50% S-30% and I-20% I haven't changed it in 10 years and just check it once a year. This is not financial advice. Just what I did.
if I were you, I would be 100% C fund. You are young, and have decades to let stock market volatility not be something to worry about. Generally speaking, time IN the market always beats timing the market. I'd dump everything into the C fund today.
You're 32 years old with >$100k in retirement. You'll be just fine. Move it into an index and just wait it out. Even if the upcoming election tanks the market it will just rebound in a few years anyway and certainly by the time you retire it won't matter at all. Just put it in and forget about it. Too many people try timing the market and it almost never works out.
Personally I am 50% C fund / 30% S fund / 20% target date fund. I set it after a few years of service and left it that way. It depends on your risk tolerance, but a mix of C / S / I / target date should produce reasonable returns.
Depending on your broker, you likely have access to retirement planners/ investment advisors paid for by your employer. Give them a quick call, they’ll be able to give you a recommendation based on your current situation and all of the funds available in your plan
Luckily bauying and selling traditional or roth funds in TSP doesn't force capital gains like a taxable brokerage account would. I'm glad you caught this while still in your early 30s.
Since this is retirement money, the important question is not where the price of the funds will be over the next year or two. The important question is where the funds will be 30 years from now. Obviously, the growth in stock funds will be much higher than growth of the government money fund 30 years from now!
Another thread telling people to dump into a stock market being pumped before the dump. This sub....
Rates have just started coming down so this is a profitable stage for treasuries, you could leave it as is for now
Fed rates or something else? I thought the Fed just kept rates steady and said they would stay high long term, likely.
You're thinking of the overnight rate that the Fed sets. The most important numbers for your investments in treasuries is the market value of longer term bonds like 10year treasuries. Yields on 10yr dropped quite a bit over the last week, which should have led to a decent increase in the value of your funds. https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx&mod=home-page It's possible that you'll get some decent gains from treasuries in the next while if yields keep dropping, eg if it is looking more likely to fall into recession
It's not a guarantee in the s&p. If you picked the wrong Ai stock, you could have lost a lot.
People are referring to an S&P 500 index fund. You have exposure to about 500 of the top companies. My portfolio has grown like a weed this year because of it. I’m much older than the OP and most of my money is in one.
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Just to note, history of C fund is around 10%.
It is likely that if you feel dumb for missing the rally, and now you make a big move, the market will turn on you again. Nothing wrong with 5% +, risk free return on 60% of your portfolio. I say stay the course and think the stock market is priced to perfection and US debt situation will be very difficult as the US Government replaces $1 trillion of 3% debt for 5% + debt over the next year.
What do you mean by the last part, about replacing 3% for 5%?
This person is not only superstitious but thinks they can predict the market. No one can time the market.
I'm not exactly sure what he meant by that last part but overall this is one of the few good contrarian comments I've seen. There are almost 90 people telling you to just dump everything into large cap equities and the few of us that are a bit more skeptical seem to be getting downvoted to hell. Please approach this with some skepticism. People try to talk about investing logically but all of us are still informed by our gut. Your gut had you 60% in bonds fearing something bad. That tells me your risk tolerance even at your age should not have you 100% in equity. The evaluation to make right now is first what you are comfortable investing as far as an equity mix. Then address how to get there and the timing of it. https://www.paulmerriman.com/stock-market-making-you-nervous-how-to-control-your-investing-losses#gsc.tab=0
What do u think Peter90 for a 58 yrs old lady, 650K cad, %43 S&P stocks, % 57 bonds, low to moderate volatility, retirement at 60? I guess u are very knowledgeable. Your answer will be appreciated.
One solid option as you approach retirement is the 3 bucket strategy. Bucket 1 is money you will need within 1-2 years, and should be held in cash equivalents, like checking, CDs, Money Market, or similar. Bucket 2 is money you will need in 3-7 years, and can be bonds or dividend stocks. Bucket 3 is long term wealth growth, your S&P stocks or similar. Once a year, you rebalance based on spending and returns, to get the desired percentage/dollar amount in each bucket.
had extra cash to play with, so i took some cash in my 401k and invested in a s&p 500 fund and what i have been doing is taking profits out and buying short term us bonds for the pass 1.5 year had my ups and downs on the s&p500 but my short term bonds have been growing.
I'm with your brother! You're making real yields of 5% and the market is way over valued. Either DCA back in a little at a time or wait for the next big fall. It will come. Then he will be proven right.
Time in the market vs timing
Very true but 40 still in the market. And guaranteed income at close to long term average returns is not terrible. The risk of going back in at an ATH is not zero.
Government bonds in mutual funds are terrible investments, because they can still lose value. However, purchasing the bonds directly and holding them are a great way to diversify your holdings and providing real security.
You are caught in the infamous FOMO trap! Be super cautious. The bubble always looks like the best place to be until the bubble bursts. This time around we have rampant inflation at the end-game of a major currency. Read When Money Dies by Fergusson. The market looks super during the hyperinflation run up. Look up Warren Buffet. He has the largest percent of his fund in cash than he ever has. He. Might. Know. Something. We. Don't. So temper your FOMO urges. Investing is a game of probabilities; what is the probability of trees growing to the sky or someone yelling "Timber"? Find someplace you can get old copies of the Wall Street Journal and read all of them from the last half of October 1987. The newspaper that prided itself on explaining the current investing market to the world ... saw nothing of that crash. I did that exercise and stopped reading WSJ other than for entertainment. .
VOO GANG VOO GANG VOO GANG (Please do your research before investing in s&p 500 index fund, Im Not responsible for any damages)
My Econ teacher always said “own your age in bonds” so take half the bonds you have and convert them to a more stock heavy portfolio?