Q: After reading your April 5 column, I was a bit confused if you were suggesting in his example that an investor in the L2020 fund should switch to, say, an L2010 or L Income fund when C, S and I share prices increase to reduce exposure to higher risk funds. I thought the point of the L funds was to leave them be until retirement? I have two Thrift Savings Plan accounts — one from the military (to which I no longer contribute) and one from my federal government service. This time last year, I swapped everything in my federal government account, which I’d let accumulate in the G fund since entering federal service 2.5 years ago, into the L2040 fund with the intention to leave it alone until I retire. Also, for the last year, I’ve continued to allow five percent percent of my pay (my only current contribution to the TSP) to go into the L2040 account, with no intention of changing until I retire based on the theory of dollar cost averaging. My military fund TSP account to which I no longer contribute, however, I try to manage on my own by interfund transfers (very infrequently) as you suggest to lessen my exposure to high-risk funds when prices for their shares rise. Can you help me better understand your advice in the column? My next move for my military account (I think) should be to rebalance my exposure to the C, S and I accounts by selling some of their shares and moving into the F or G funds. But I’m confused about what to do with my federal account (L 2040). Should I move my incoming contributions to the G or F funds to avoid the current high share prices and leave what’s in the L 2040 in there?
A: I have not recommended using the L funds, although you could implement the strategy proposed in my column by switching between them. I prefer that you use the basic TSP funds to avoid the robotic — and possibly counterproductive — allocation migration they impose. The point of my column was fairly simple: Rebalance your portfolio to the appropriate allocation periodically. This will have the effect of selling off the winners in favor of the laggards.