Q. Your Sept. 24 column in Federal Times made the suggestion to increase allocation in the G Fund at the expense of the other funds, including the F Fund. I have not normally been heavily invested in the F Fund in my 25 years. However, with the F Fund having the second-highest return of any fund since its inception (5.86 percent); that it has never had a negative yearly return; that there is a continually declining performance of the G Fund; and the low probability that interest rates will go up any time soon, I see the F Fund as a safe haven. With the G Fund barely keeping pace with inflation, the small risk to stay invested in the F Fund seems low risk. Am I missing a key risk factor?
A. Hmm. So, you think I’m exactly wrong? I guess it’s possible, but not very likely. 😉 The fact that the F Fund has performed well in recent years and that interest rates are near zero (falling interest rates fueled the F Fund’s rise) mean that the risk in the F Fund is relatively high. The G Fund offers a yield close to that earned by the F Fund but without the risk of loss. That’s my rationale. If I understand you correctly, yours is that what has gone up will keep going up?