TSP allocation


Q. I’m 32 years old, have been contributing to the Thrift Savings Plan since 2005. I have 40 percent in my C Fund, 30 percent in S and 30 percent in I. Is this a good contribution allocation? I want to be as aggressive as possible, but I am also looking at moving most of my gains to the G Fund due to the fact the market may be headed in the same direction as 2009. If I want to protect my gains with the means of buying back at a lower price, what would be your recommendation be on rebalancing the money in my account and adjusting percentages on new money coming in?

A. You’re asking me how to implement your investment strategy. If you don’t know how to manage it, why are you using it in the first place? What do you know about that asset allocation you’re using? How is it likely to behave? What is its expected return? What is the standard deviation of those returns? How do these characteristics support or threaten your lifetime financial plan?

As I’ve pointed out many times, your question is like asking me how work the controls on your care without telling me where you are, where you want to go, what stops you want to make along the way, when you’d like to get there, what kind of car you’re driving or how much fuel you have in the tank. Your investment tactics should be based on an investment strategy which includes cash reserve and asset allocation targets, securities selection and transaction timing algorithms.

I don’t manage portfolios the way you are managing yours because there is too much uncertainty that could be avoided. The best advice I can give you is to recommend that you identify the investment allocation that will support your lifetime financial goals with a minimum of risk and then rebalance to that allocation on a regular fixed schedule — at least once per year and not more than four times per year.


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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.

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