G Fund vs. F Fund

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Q. In March of this year, I moved 50 percent of my balance from the G Fund to the F Fund because I was tired of not making any money in the G Fund. I evaluated the performance of the F Fund over the past several years before doing this and assumed that risk was low. Initially, I was quite happy with my decision, but now I see the F Fund share price dropping consistently. Is this drop in the F Fund share price temporary, and do you expect it to regain its momentum? I’m now a little nervous about moving to the F Fund and may cut my losses and move the money back to G. Can you give me your opinion?

A. Let this be your wake-up call. There is so much wrong with this, it’s hard to know where to start. You ALWAYS made money with the G Fund. You should NEVER base your future expectations for investment performance on recent history. Things always go up before they go down, and vice versa. Of course the F Fund’s share price will rise again — eventually. Nothing is right with the approach you’re taking, and everything is wrong. It’s obvious that you’re not qualified to be managing an investment portfolio. You aren’t even asking the right questions. Maybe you should put your money into the L Fund that most closely corresponds to your life expectancy and cross your fingers.

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About Author

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.

2 Comments

  1. Many Feds mistakenly believe that the G Fund and the F Fund are nearly interchangeable bond funds and that the F offers a slightly higher rate of return in exchange for some undefined but minimal risk when compared to the G, which provides a slightly lower return but is backed by the US Government. In fact, the two funds are not at all similar.

    When interest rates go up, the value of the bonds held by the F Fund fall. Most experts believe that interest rates will be rising for the foreseeable future, so you can expect that the F Fund will continue to fall. The securities held by the G Fund are not marketable, so they are not interest rate sensitive and you cannot lose money with the G Fund.

    Read much more at: http://www.tspallocation.com/f-fund-vs-g-fund-in-tsp-allocation/ | TSP Allocation Guide

  2. Randy Rettinger on

    OK, so I have been using the F Fund to swap funds between the F & S funds for quite some time now to take advantage of the increased volatility of the S Fund to dramatically increase my earnings in the TSP. Move it all into the S Fund when it drops and move it all to the F Fund when it peaks, or there about. But certain never let anyone tell you that you are not qualified to manage your own funds such as in the first answer. Right now I have 100% of my funds in the F Fund. Sure, I am losing and the evaluation of ‘recent’ performance tells me I should probably start swapping funds between the S & G funds so I am assured not to lose when I am out of the S Funds. But when I was in the F before, I was making nearly 1% rather than the 0.01% the G fund offers on a regular basis! The only advice I have is to not be like I was for years, set it and forget it. If you are not looking at your account weekly and understanding what is happening, you are a fool. It doesn’t mean you have to take immediate action the first time your fund falls 2% in a month, but it might be cause for concern. Learn the market ups and downs and you can make money from swapping funds back and forth and cash in on 15% or more performance instead of 0.1% or below…

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