Browsing: bonds

Risk efficiency

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Q. I saw you use the term risk efficiency in a recent response, and it made me curious. I have a nice little amount in the Thrift Savings Plan now. I don’t think I will be needing it in the future, except to hand down to future heirs, and so have tried to maintain a 70 percent stocks (35 percent C, 15 percent S and 20 percent I), 15 percent F, 15 percent G ratio. I read in a financial magazine (sometime around 2009) that a 70/30 ratio of stocks to bonds and/or cash reduced the risk considerably over a…

F Fund

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Q. It seems everywhere a person reads, the “expert” advice is to get out of bonds. It’s likely that interest rates will climb soon (they certainly will not go lower), the world is awash in debt etc. Your advice is to substitute a portion of other funds in place of F. Given the predicted bond climate, why not reduce F Fund allocation to near zero? Is there some reason I’m missing for maintaining an allocation in F above low single digit percentages or perhaps no F fund allocation at all? In other words, if the F Fund is about to…

F Fund and G Fund

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Q. I recently decided to shift the corporate bond portion of my overall portfolio into my retirement accounts (i.e., shift my retirement account holdings largely into corporate bonds, and shift my taxable account holdings away from them) since the income from bonds is taxed at a higher rate than income from equities. Since the Thrift Savings Plan is about one-third of my retirement account money, I took a closer look at the F Fund and I was shocked to see that the majority of the Barclays Capital U.S. Aggregate Bond Index that the F Fund tracks is treasuries. I think…

G Fund

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Q. How is the Thrift Savings Plan’s G Fund related to bonds I keep hearing about lately being sold off from other bond funds? How is the G Fund different from these funds? Is this bond fund an inflation-protected bond fund? How does this fund guarantee the principal investment? Who takes the loss if yields on bonds purchased are lower when shares in this fund are transferred than on when those shares were bought? A. The G Fund is backed by the federal government and accrues interest equal the weighted average interest rate for all outstanding U.S. Treasury debt. It is not a…

G Fund vs. F Fund

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Q. Many experts are indicating that there is a bond market bubble growing. In addition, The Wall Street Journal survey report indicates that interest rates will be going up about a point in 2014. For the next year or two, would it be best to move money out of the F Fund and place it in the G Fund, or move monies out of both funds and place them in market funds like C, S or I? Since both G and F are invested in bonds, will increasing interest rates affect invested funds negatively? A. I have been substituting G Fund…

F Fund

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Q. I am 61 and have $200,000 in the Thrift Savings Plan. I’m in process of transferring another $240,000 from an outside discount brokerage firm to my TSP. I would like to transfer all of the $240,000 to the F Fund. With interest rates possibly remaining low for another few years, is this a good move? When interest rates rise, how much will the F fund shares decrease? The bonds it holds are short and intermediate, so I’m assuming it won’t lose as much as if it held long-term bonds, but I’m not clear on how much I could lose. I’m trying to move…

Bond yields and the G Fund

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Q: As the government treasury bond yields go up, does the Thrift Savings Plan’s G Fund share price increase? The opposite would be true of the F Fund, since share prices would be affected in a negative way with rising interests rates. A: While there are times when the daily return for the G Fund is negative, the monthly and annual change in the G Fund’s share price is always positive.