Funds for diversification


Q. For a typical retiree (or near retiree), we utilize the TSP funds as well as outside investments. Do you have a rule of thumb regarding how many funds to own for diversification, i.e., how many is too many? Also, what are the best asset allocation calculators to use (free, of course)? Lastly, for the G Fund, in an asset calculator, since that is unique to the TSP, what proxy ticker should I use to represent the G Fund in overall asset allocation evaluations?

A. You can effectively diversify your portfolio using a broad market stock index fund, like the C Fund, and a broad bond index fund, like the F Fund and cash — stocks, bonds and cash. This will mostly get the job done. You can improve performance by further subdividing these asset classes, but you’ll produce diminishing returns for your efforts. In other words, if you do it right, you can modestly improve performance by moving from three funds to four or five, but you won’t get much for moving from 10 to 11 funds. Anything more than a dozen funds is a waste of effort.

I’m not sure what you mean by “asset allocation calculators”, but you’ll find a wide range of risk-efficient allocation models by using the L funds as your guide (

The G Fund is most closely equivalent to cash.


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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 and view his blog at

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