Q. I’m an engineer that so far has three years with the government, I’ve chatted with my colleagues at work about the TSP and how one can really reap the benefits of the program with some good analysis and risk factoring. I have 10 percent of my bi-weekly check go toward the TSP and split my allocations 50 percent G fund and 50 percent C fund. I would like to be more active in seeing my funds grow and was wondering what the best way to do that is? So far, I’ve just been letting the TSP sit and haven’t responded to any big dips in the market. I’ve occasionally been monitoring the charts for each fund online but haven’t had the guts to act on anything. What do you think the average Joe does? Does it depend on the quarter returns? Current events? Should I be making a call based on a day’s big drop? Being a new blood in the government means that I have a good 27 or so years left before retiring, so I do have the time and patience to not be active with my TSP and just let it sit.
A. Trying to manage your portfolio by timing the market might make you feel good, but it actually adds more risk to your portfolio without any good reason to expect a higher rate of return. More risk without more return? That’s a sucker’s bet. That’s why so many intelligent and experienced investors without a conflict of interest (including Warren Buffet, Jack Bogle, Charles Ellis and Burton Malkiel, to name a few) recommend buying and holding index funds. The TSP provides the low-cost, efficiently diversified index funds. It’s your job to use them wisely. If you’re not sure about the proper asset allocation scheme for your particular circumstances, then I suggest you use the L Fund that most closely corresponds to your life expectancy. In your case, that’s the L 2040 Fund.
