Diversification advice


Q. I am in the process of moving my traditional IRAs into the TSP, but would like to keep some money in asset classes not available under TSP. Specifically, I have in mind current investments in emerging markets and real estate investment trust index mutual funds. Assuming that I would not need to liquidate these two classes of assets for at least five years, do you have any advice on the percentage of the total amount of post-retirement assets I should hold in each class?

A. I recommend that you forgo this unnecessary concentration (it’s not diversification) and move the money into the TSP instead. What will you gain that is worth the certain increase in expenses you’ll bear? I guess that means that my recommended allocation to these two markets is 0 percent.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

1 Comment

  1. Emerging Markets is not present in the I Fund and thus does not represent an unnessary concentration but in fact provides more diversification.

    Holding less than 5% of an asset class is unlikely to materially affect your portfolio – 5% is too small to make a difference one way or another, so hold at least 5% of whatever asset classe you’re invested in. Emerging Markets should probably represent no more than 25% of your International holding.

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