TSP Allocation Strategy for the AGRESSIVE Investor

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nvthedoc
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TSP Allocation Strategy for the AGRESSIVE Investor

Post by nvthedoc » Sat Aug 12, 2017 11:18 am

Hello,

I have a question that I was hoping people can help me with. Until recently, I had been inadvertently been putting most of my investements into the G fund, which I recently found out is probably one of the worst things I can do for maximizing my return.

I am young (mid 30s) and my husband and I have a very good income. I believe that we can absorb significant risk.

What would be the best allocation strategy:

60 (C)-20 (S) -20% (I) as people such as Dave Ramsey have suggested. This is the strategy that I just switched it too. What would you do if you had 30 years and wanted to maximize return? Thanks.

Alternatively, what about Edelman strategy

40 (C)- 40 (S)-20% (I)

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JamalJones
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Re: TSP ALLOCATION STRATEGY FOR THE AGRESSIVE INVESTOR

Post by JamalJones » Sat Aug 12, 2017 11:32 am

Having had all your TSP investments in the G fund, you've likely not experienced any market volatility. I would expect that if you go 100% equities, you could panic sell if the market drops a significant amount in the near-term. I, and many others, suggest at least 20% fixed income. It will help with riding out big drops in equities. And the G fund is an excellent fixed income investment. In NEVER goes down in value. Take advantage of it! I would suggest the following allocation for you:

G - 20%
C - 45%
S - 12%
I - 23%
TSP + Vanguard Roth IRA: 80% equities (C, S, I Funds and VTSAX,VTIAX, VEMAX) / 20% bonds (F and G Funds) | MOTBH!

livesoft
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by livesoft » Sat Aug 12, 2017 11:46 am

There is no way to predict the future, so there is no way to know which allocation to select to get the maximum.

HOWEVER, one can come up with an asset allocation plan that has about 10% to 20% in the G fund along with the 90% to 80% in the various equity funds and just do the normal rebalancing along the way when things drop and when things go up and when one's portfolio gets too far from the stated asset allocation plan. This is explained in the various articles and books linked in the forum's wiki pages that is linked in my signature.

That is, don't expect a quick short-cut answer to get you where you want to go. I suspect that's how you ended up with most of your investments in the G fund in the first place.
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retiredjg
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by retiredjg » Sat Aug 12, 2017 11:57 am

There is no reason to switch from near 100% bonds to 100% stock. I'd suggest at least a 20% allocation to bonds. G Fund and F Fund are each worth using.

Why not put the money into one of the more aggressive LifeStyle funds until you know more about what you are doing? Or until forever - there is really no reason not to just keep it.

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ruralavalon
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Re: TSP ALLOCATION STRATEGY FOR THE AGRESSIVE INVESTOR

Post by ruralavalon » Sat Aug 12, 2017 12:01 pm

Welcome to the forum :) .
nvthedoc wrote:
Sat Aug 12, 2017 11:18 am
Hello,

I have a question that I was hoping people can help me with. Until recently, I had been inadvertently been putting most of my investements into the G fund, which I recently found out is probably one of the worst things I can do for maximizing my return.

I am young (mid 30s) and my husband and I have a very good income. I believe that we can absorb significant risk.

What would be the best allocation strategy:

60 (C)-20 (S) -20% (I) as people such as Dave Ramsey have suggested. This is the strategy that I just switched it too. What would you do if you had 30 years and wanted to maximize return? Thanks.

Alternatively, what about Edelman strategy

40 (C)- 40 (S)-20% (I)
Neither strategy includes any fixed income allocation, which is a big mistake in my opinion. About as wrong as putting everything in the G Fund.

In the mid 30s I suggest around 20-25% in fixed income, which could be the F Fund, the G Fund or a combination of the two. This is expected to substantially reduce volatility (risk), with only a relatively slight decrease in return. Graph, "An Efficient Frontier: the power of diversification". Please see the wiki articles Bogleheads® investment philosophy, "Never bear too much or too little risk", and "Asset allocation".

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities". Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). You can find lots of debate here on international allocation, opinions running from 00% to 50% of stocks in international stocks.

That would be about 20% bonds, 20% international stocks,and 60% domestic stocks. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.

If your TSP was the only account that could be:
60% C Fund;
20% I Fund; and
20% F Fund.

Does your husband also have a work-based account like a 401k, 403b, 457 or TSP? Do you or your husband have any IRAs? Do you have any other investing accounts?

It is often best to look at all accounts together as a single unified whole, rather than consider each account separately. Start fund selection by choosing only the one or two best funds (diversified + low ER) in each of the work-based accounts, where the choices offered are limited. Then complete the rest of the asset allocation using the nearly unlimited choices available in any IRAs or taxable account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Swansea
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by Swansea » Sat Aug 12, 2017 12:57 pm

nvthedoc wrote:
Sat Aug 12, 2017 11:18 am
Hello,

I have a question that I was hoping people can help me with. Until recently, I had been inadvertently been putting most of my investements into the G fund, which I recently found out is probably one of the worst things I can do for maximizing my return.

I am young (mid 30s) and my husband and I have a very good income. I believe that we can absorb significant risk.

What would be the best allocation strategy:

60 (C)-20 (S) -20% (I) as people such as Dave Ramsey have suggested. This is the strategy that I just switched it too. What would you do if you had 30 years and wanted to maximize return? Thanks.

Alternatively, what about Edelman strategy

40 (C)- 40 (S)-20% (I)
Your 60-20-20 looks fine to me at your age. You can take more risk than someone who does not have a FERS type pension eligibility. I am retired under CSRS and was 100% C fund into my early 50s. You need to set asset allocation goals by decade, and be sure to make adjustments annually to stay within the goals, all of which will depend upon your risk tolerance. An additional factor would be the size of your annuity. I favor more risk if one's high 3 and years of service yield a substantial pension benefit.

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tadamsmar
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by tadamsmar » Sat Aug 12, 2017 2:17 pm

I think it is best to come up with an overall asset allocation that includes both you and your husband's retirment savings. That is what my wife and I have always done.

If you are both federal employees with little or no other retirement investments, the the TSP L Funds would be a good choice for both of you. This is simple and there will be no real assurance that you could do better with a more complex plan.

But, if you (as a couple) have retirement investments outside of the TSP, then you might want design an overall allocation and not exclusively use L Funds, that is what we do. Or, to keep it simple, your husband could just use some non-TSP life-cycle fund (if that is a possibility) and you could just use the a L Fund.

You might want to provide more information, as specified in this post:

viewtopic.php?f=1&t=6212

mckaydw
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by mckaydw » Sat Aug 12, 2017 2:27 pm

Just put it all in L2050 and forget about it until retirement age.

nvthedoc
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by nvthedoc » Sat Aug 12, 2017 2:29 pm

Thanks for the responses.

My husband is a as a radiologist and is a partner in his practice. He has a sound income and he also maximizes his profit sharing plan. About 54k/year.

That was why I was considering eliminating the G and F funds.

nvthedoc
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by nvthedoc » Sat Aug 12, 2017 2:38 pm

I forgot to indicate that he contributes to a vanguard L2040 fund.

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whodidntante
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by whodidntante » Sat Aug 12, 2017 2:39 pm

The G fund is excellent. It currently yields 2.25% with no interest rate risk or credit risk. I would put all of my fixed income there if I had access to it.

What does aggressive mean to you? When some people say "aggressive" they could mean high % stock allocation, overweighting small and value, or overweighting investments that have higher expected forward returns like emerging markets. The TSP doesn't provide many knobs to twist though you could get some exposure to domestic small if you like. An aggressive allocation within the TSP could be:
25% C fund
45% S fund
30% I fund

And then buy emerging market funds in other investment accounts. 20% of your total portfolio value would represent an overweight of EM.

MnD
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by MnD » Sat Aug 12, 2017 2:54 pm

I don't see any reason to overweight the US especially now. I am moderately aggressive (70/30) especially for my age (55 and 1 year from retirement) per below. For aggressive you could lower the G fund % and add proportionally to the other funds.
If you are going to be aggressive you need to add couple of positions outside of the TSP, namely small cap international and emerging markets.

C 25.0%
S 12.5%
I 20.0%
G 30.0%
VSS 5.0% Small cap international
VWO 7.5% Emerging markets

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tadamsmar
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by tadamsmar » Sat Aug 12, 2017 3:19 pm

nvthedoc wrote:
Sat Aug 12, 2017 2:38 pm
I forgot to indicate that he contributes to a vanguard L2040 fund.
It would be quite appropriate for you to use the TSP L2040 Fund.

delamer
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by delamer » Sat Aug 12, 2017 4:15 pm

nvthedoc wrote:
Sat Aug 12, 2017 2:29 pm
Thanks for the responses.

My husband is a as a radiologist and is a partner in his practice. He has a sound income and he also maximizes his profit sharing plan. About 54k/year.

That was why I was considering eliminating the G and F funds.
Many people on this site have lived through 30% to 50% drops in the value of their retirement accounts in the first decade of this century.

If you have not experienced such a drop and don't know how you'd react (panic selling was common as was staying out of the market for a decade post-loss), you are better off having a 20% to 30% allocation to bonds/cash in your portfolio.

jbolden1517
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by jbolden1517 » Sat Aug 12, 2017 4:23 pm

C is not a particularly good fund. S is. I will get you the exposure to C and also international.
40% S, 40% I. 10% F, 10% C. That's an aggressive portfolio (90/10). If you want to turn it down (80/20) take the 10% C and allocate 5% to G and 5% to F.

Bastiat
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by Bastiat » Sat Aug 12, 2017 6:10 pm

jbolden1517 wrote:
Sat Aug 12, 2017 4:23 pm
C is not a particularly good fund. S is. I will get you the exposure to C and also international.
40% S, 40% I. 10% F, 10% C. That's an aggressive portfolio (90/10). If you want to turn it down (80/20) take the 10% C and allocate 5% to G and 5% to F.
This is incorrect.

The C fund tracks the S&P 500 at 0.038% ER. It is an excellent fund.

The S fund tracks the Dow US completion TSM index. It does not include S&P 500 (C fund) or international stocks.

The I fund tracks the MSCI EAFE. It excludes the US and Canada, giving no exposure to S&P 500 (C fund).

A good aggressive allocation might be:

37% C
35% I
28% S

My allocation is:
37% C
32% I
26% S
5% G

This achieves ~33% allocation to international and a tilt to small caps.

Helo80
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by Helo80 » Sat Aug 12, 2017 6:25 pm

I'm at 60/20/20 C/S/I.... I guess that's Dave Ramsey's recommendation?

I'm still a far ways off and plan to weather a couple of bear markets.

Indexboss
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by Indexboss » Sat Aug 12, 2017 6:35 pm

I was using Dave Ramsey's suggested 60 C, 20 I, 20 S. I read the Boglehead retirement book that suggested no more than 90 percent equities at any time. I have changed it to 10 G, 56 C, 17 S, 17 I. I just combined the two theories. I may just simplify it down the line and switch to a L fund, but I'm using my TSP account to "practice" learning how to rebalance.

jbolden1517
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by jbolden1517 » Sat Aug 12, 2017 7:05 pm

Bastiat wrote:
Sat Aug 12, 2017 6:10 pm
This is incorrect.

The C fund tracks the S&P 500 at 0.038% ER. It is an excellent fund.
I think you may want to consider the distinction between "incorrect" and you disagree with an opinion. I agree the C fund tracks the SP500.
Bastiat wrote:
Sat Aug 12, 2017 6:10 pm
The S fund tracks the Dow US completion TSM index. It does not include S&P 500 (C fund) or international stocks. The I fund tracks the MSCI EAFE. It excludes the US and Canada, giving no exposure to S&P 500 (C fund).
Large international and small USA track well with almost all aspects of large USA. They contain the same factors. Not including the stocks doesn't mean not including those correlations / factors.
Bastiat wrote:
Sat Aug 12, 2017 6:10 pm
A good aggressive allocation might be:
37% C 35% I 28% S
That puts one 72% in primarily large growth.

trueblueky
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by trueblueky » Sat Aug 12, 2017 9:52 pm

nvthedoc wrote:
Sat Aug 12, 2017 2:29 pm
Thanks for the responses.

My husband is a as a radiologist and is a partner in his practice. He has a sound income and he also maximizes his profit sharing plan. About 54k/year.

That was why I was considering eliminating the G and F funds.
If he has fixed income in his account, it might be better to consider the two together and hold G in yours. The G Fund is likely better than whatever bond fund is available is his account. Give us details on his and we can explain why.

tigermilk
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by tigermilk » Sat Aug 12, 2017 10:12 pm

I was 60/20/20 C/S/I up until late last year. I was all equities for 25 plus years, Only now have I started in G an F as I'm about 9 years from earliest retirement age. I'm currently sitting at around 93/7 equitiy/bond. Lived through all the downturns the last 28 years without changing a thing, and it's worked well for me

WanderingDoc
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by WanderingDoc » Sat Aug 12, 2017 10:24 pm

tigermilk wrote:
Sat Aug 12, 2017 10:12 pm
I was 60/20/20 C/S/I up until late last year. I was all equities for 25 plus years, Only now have I started in G an F as I'm about 9 years from earliest retirement age. I'm currently sitting at around 93/7 equitiy/bond. Lived through all the downturns the last 28 years without changing a thing, and it's worked well for me
That's great to hear! Would you recommend that same strategy for myself, who doesn't care about the stock market, and won't use it to any significant extent for retirement? (Rental real estate will cover that). I will fund the TSP from next calender year probably only until the match.
John Bogle predicted modest 5 or 6% returns for the foreseeable future.
One day it suddenly dawned on me that I had won the real estate lottery.

Bastiat
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by Bastiat » Sun Aug 13, 2017 1:30 am

jbolden1517 wrote:
Sat Aug 12, 2017 7:05 pm
Bastiat wrote:
Sat Aug 12, 2017 6:10 pm
This is incorrect.

The C fund tracks the S&P 500 at 0.038% ER. It is an excellent fund.
I think you may want to consider the distinction between "incorrect" and you disagree with an opinion. I agree the C fund tracks the SP500.
Bastiat wrote:
Sat Aug 12, 2017 6:10 pm
The S fund tracks the Dow US completion TSM index. It does not include S&P 500 (C fund) or international stocks. The I fund tracks the MSCI EAFE. It excludes the US and Canada, giving no exposure to S&P 500 (C fund).
Large international and small USA track well with almost all aspects of large USA. They contain the same factors. Not including the stocks doesn't mean not including those correlations / factors.
Bastiat wrote:
Sat Aug 12, 2017 6:10 pm
A good aggressive allocation might be:
37% C 35% I 28% S
That puts one 72% in primarily large growth.
While I certainly do disagree with your opinion to exclude two-thirds of the US market from one's portfolio (as I think most Bogleheads would), you said "I will get you exposure to C" - which is definitely incorrect.

My suggested allocation actually puts one underweight large growth.

Warren Buffett has famously recommended an S&P 500 index fund for the average investor. Why you recommend specifically excluding the largest and most successful companies in the world from a portfolio is curious. You're essentially saying that you know better than the market how to value stocks; I submit that you do not.
Last edited by Bastiat on Sun Aug 13, 2017 3:25 am, edited 3 times in total.

travelogue
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by travelogue » Sun Aug 13, 2017 1:59 am

mckaydw wrote:
Sat Aug 12, 2017 2:27 pm
Just put it all in L2050 and forget about it until retirement age.
I think this is a decent suggestion. You could do an interfund transfer of existing contributions to L2040 to protect principle and then pile new contributions into L2050 to buy into future dips.

tigermilk
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by tigermilk » Sun Aug 13, 2017 5:38 am

WanderingDoc wrote:
Sat Aug 12, 2017 10:24 pm
tigermilk wrote:
Sat Aug 12, 2017 10:12 pm
I was 60/20/20 C/S/I up until late last year. I was all equities for 25 plus years, Only now have I started in G an F as I'm about 9 years from earliest retirement age. I'm currently sitting at around 93/7 equitiy/bond. Lived through all the downturns the last 28 years without changing a thing, and it's worked well for me
That's great to hear! Would you recommend that same strategy for myself, who doesn't care about the stock market, and won't use it to any significant extent for retirement? (Rental real estate will cover that). I will fund the TSP from next calender year probably only until the match.
John Bogle predicted modest 5 or 6% returns for the foreseeable future.
I can only say it worked for me. You need to find the mix that you are comfortable with. I will say that many hear will always bring up the "but what if the market crashes by 50%" argument. That may happen, but two things: a) how much did I lose out on by not being equity heavy in the years leading up and b) what does that drip mean for the broader economy? For the former, given the 3 significant stock market drops in the last few decades, my 100/0 position, when back tested, beat any other position with the TSP. Also, while not as bullish with my TSP now, I'm still all equity in my non-TSP investments.

jbolden1517
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by jbolden1517 » Sun Aug 13, 2017 6:41 am

Bastiat wrote:
Sun Aug 13, 2017 1:30 am
Warren Buffett has famously recommended an S&P 500 index fund for the average investor. Why you recommend specifically excluding the largest and most successful companies in the world from a portfolio is curious.
Because the TSP doesn't have a value fund it is the closest one can do. The SP500 4500 excludes the worst bubble stocks in the United States. Excluding the worst of the worst enhances returns.
Bastiat wrote:
Sun Aug 13, 2017 1:30 am
You're essentially saying that you know better than the market how to value stocks; I submit that you do not.
You are trying here to have it both ways. If one assumes security prices are perfect then arbitrary portfolios are going to perform roughly equivalent to market portfolios with at worst some slight disadvantage in terms of diversification. Your choice of allocation makes little difference. If one is not an intellectual nihilist and believes that things about companies are knowable then stock evaluation becomes possible. I'll submit that the market doesn't really value stocks it values cash flow. If there are B dollars buying a stock and S dollars selling a stock the price of the stock will be $B/S. The quantity of B and S have some relation to relative and absolute valuation but it is not perfect nor even particularly good as the wild gyrations of the USA market and individual securities demonstrate.

The choice of 4500 vs. 500 doesn't require being even adequate at security valuation. Those are massive aggregates they aren't individual securities. Valuing an aggregate is much easier than valuing an individual security since almost all company specific features drop out. Those are going to track extremely public facts like:
a) Nominal USA long term economic growth
b) Inflation adjusted long term interest rate
c) Current dividend payout of broad aggregates
etc...

Now there is to some extent a level of sector / industry bias in the 4500 vs. the 500 so it is a bit harder than the above but not much.

As for me personally valuing securities better than the market, you don't know me, and you are simply wrong. The market is so dreadful at valuing the discount flow of dividends, the intrinsic value of a security, it is rather easy to value better than the market with a high degree but not perfect precession. I have a pretty good over 20 year track record of valuing securities at this point. I'm far better today than when I started and when I started I was already better than the market. I've made my fair share of mistakes but I've certainly done far better through the years than just holding a random basket of stocks at whatever random price the market happens to be selling it at today.

"Beating the market" with a long time horizon and without other investors to keep happy isn't a high bar. Beating the market when you have to attract and retain funds from ignorant investors who have all sorts of crazy ideas while competing against thousands of other funds for the same dollars and while often having to keep sell side clients happy is quite hard. Don't conflate the problems you as an individual investor face to those a mutual fund manager faces. They aren't remotely similar. I can take $1-10k positions a mutual fund manager can't.

Bastiat
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by Bastiat » Sun Aug 13, 2017 2:02 pm

jbolden1517 wrote:
Sun Aug 13, 2017 6:41 am
Bastiat wrote:
Sun Aug 13, 2017 1:30 am
Warren Buffett has famously recommended an S&P 500 index fund for the average investor. Why you recommend specifically excluding the largest and most successful companies in the world from a portfolio is curious.
Because the TSP doesn't have a value fund it is the closest one can do. The SP500 4500 excludes the worst bubble stocks in the United States. Excluding the worst of the worst enhances returns.
Bastiat wrote:
Sun Aug 13, 2017 1:30 am
You're essentially saying that you know better than the market how to value stocks; I submit that you do not.
You are trying here to have it both ways. If one assumes security prices are perfect then arbitrary portfolios are going to perform roughly equivalent to market portfolios with at worst some slight disadvantage in terms of diversification. Your choice of allocation makes little difference. If one is not an intellectual nihilist and believes that things about companies are knowable then stock evaluation becomes possible. I'll submit that the market doesn't really value stocks it values cash flow. If there are B dollars buying a stock and S dollars selling a stock the price of the stock will be $B/S. The quantity of B and S have some relation to relative and absolute valuation but it is not perfect nor even particularly good as the wild gyrations of the USA market and individual securities demonstrate.

The choice of 4500 vs. 500 doesn't require being even adequate at security valuation. Those are massive aggregates they aren't individual securities. Valuing an aggregate is much easier than valuing an individual security since almost all company specific features drop out. Those are going to track extremely public facts like:
a) Nominal USA long term economic growth
b) Inflation adjusted long term interest rate
c) Current dividend payout of broad aggregates
etc...

Now there is to some extent a level of sector / industry bias in the 4500 vs. the 500 so it is a bit harder than the above but not much.

As for me personally valuing securities better than the market, you don't know me, and you are simply wrong. The market is so dreadful at valuing the discount flow of dividends, the intrinsic value of a security, it is rather easy to value better than the market with a high degree but not perfect precession. I have a pretty good over 20 year track record of valuing securities at this point. I'm far better today than when I started and when I started I was already better than the market. I've made my fair share of mistakes but I've certainly done far better through the years than just holding a random basket of stocks at whatever random price the market happens to be selling it at today.

"Beating the market" with a long time horizon and without other investors to keep happy isn't a high bar. Beating the market when you have to attract and retain funds from ignorant investors who have all sorts of crazy ideas while competing against thousands of other funds for the same dollars and while often having to keep sell side clients happy is quite hard. Don't conflate the problems you as an individual investor face to those a mutual fund manager faces. They aren't remotely similar. I can take $1-10k positions a mutual fund manager can't.
You're moving the goal posts and I have no interest in further derailing the thread by following you down the rabbit hole.

I specifically addressed:
1. Your incorrect statement that the I fund provides exposure to the C fund.
2. Your recommendation to leave two-thirds of the US market out of a portfolio, which I disagree with, and which is contrary to the Boglehead philosophy.

retiredjg
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by retiredjg » Sun Aug 13, 2017 2:55 pm

Bastiat wrote:
Sun Aug 13, 2017 2:02 pm
You're moving the goal posts and I have no interest in further derailing the thread by following you down the rabbit hole.

I specifically addressed:
1. Your incorrect statement that the I fund provides exposure to the C fund.
2. Your recommendation to leave two-thirds of the US market out of a portfolio, which I disagree with, and which is contrary to the Boglehead philosophy.
jbolden, before you reply....yes, it did seem that you were saying that the I fund provides exposure to the C Fund. Might not be what you meant, but it did seem that was what you said.

As for your portfolio recommendation, it would suit some people around here and there's a place for that. But why would you recommend such a lopsided and tilted portfolio to someone who is new here and has not shown much experience yet and who has not expressed an interest in leaning that way?

You can obviously suggest anything you want, but it just did not seem like a good fit to me for the poster who asked the question.

Jagman
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by Jagman » Sun Aug 13, 2017 4:04 pm

30% C (S&P 500)
30% S (Extended Market)
30% I (Developed International)
10% G (No-Fail Bonds)

That's aggressive.

25% C (S&P 500)
25% S (Extended Market)
25% I (Developed International)
25% G (No-Fail Bonds)

That's aggressive and smart.

WanderingDoc
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by WanderingDoc » Sun Aug 13, 2017 4:43 pm

Jagman wrote:
Sun Aug 13, 2017 4:04 pm
30% C (S&P 500)
30% S (Extended Market)
30% I (Developed International)
10% G (No-Fail Bonds)

That's aggressive.

25% C (S&P 500)
25% S (Extended Market)
25% I (Developed International)
25% G (No-Fail Bonds)

That's aggressive and smart.
Is there a way to extrapolate how that 4-corner TSP portfolio would have done in the last 5, 10, and 20 years? I like it. I was debating my allocation once I start contributing to the TSP again, and this seems simple and straightforward.
One day it suddenly dawned on me that I had won the real estate lottery.

jbolden1517
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by jbolden1517 » Sun Aug 13, 2017 6:03 pm

retiredjg wrote:
Sun Aug 13, 2017 2:55 pm

jbolden, before you reply....yes, it did seem that you were saying that the I fund provides exposure to the C Fund. Might not be what you meant, but it did seem that was what you said.
That is close to what I said and what I meant. Remember the original is about 3 lines and directed at a beginner. The context directly above the line here is C is a bad fund. Since C's ER is quite reasonable the only reason I could be asserting C is a bad fund is the stock selection. And then in the next line I was suggesting was an alternative to directly holding much of the C fund. So whatever I was supposedly saying in my original post could not have been that I and S contain the same stocks as C in the same ratios. What you and Bastiat are accusing me of having asserted would have been self contradictory nonsense. Now if you assume I'm an idiot then that might have been what I seemed to day. The original was quite ambiguous I didn't justify anything at all, I just gave a few lines followed by a portfolio. But if you rather assume I'm not an idiot then its pretty hard to assume I somehow meant that S and I contain C's stocks.

What I meant and stand by is the Large USA factors in C that are worth holding are covered well by I and S. Through I&S you get the advantages of C without the massive disadvantages. Together they make a better a better core.
retiredjg wrote:
Sun Aug 13, 2017 2:55 pm
As for your portfolio recommendation, it would suit some people around here and there's a place for that. But why would you recommend such a lopsided and tilted portfolio to someone who is new here and has not shown much experience yet and who has not expressed an interest in leaning that way?
Mostly what I said. The poster asked for a good aggressive portfolio. TSP funds are mostly lousy. They are a bunch of large growth funds. S is to some extent an exception and thus being the only decent fund in the group should be held as large as possible. The SP500 holds a disproportionate share of the bad stuff in TSM, getting rid of it leaves behind a pretty good fund. That and the G fund are the only good funds in the TSP. So any portfolio should center of S. Now S still has problems. The best high returning diversifier for S is I. They also happen to nicely cover most of C's factors. Hence I and S constitute a good core for a mostly stock portfolio. Everything else should be satellites. G is quite good cash but doesn't diversify anything at all. F does diversify but doesn't take on enough risk for aggressive. C as a satellite isn't bad though it is a bit redundant. But it can do nicely against various situations where you have a strong dollar combined with advantages to global corporations.
retiredjg wrote:
Sun Aug 13, 2017 2:55 pm
You can obviously suggest anything you want, but it just did not seem like a good fit to me for the poster who asked the question.
Because?

TP3
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by TP3 » Sun Aug 13, 2017 6:30 pm

what would be pros and cons of just putting everything into a L fund

jbolden1517
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by jbolden1517 » Sun Aug 13, 2017 6:54 pm

TP3 wrote:
Sun Aug 13, 2017 6:30 pm
what would be pros and cons of just putting everything into a L fund
It is a tax free account so you can trade. I'm hard pressed to think of any pros for someone is going to pay attention. If you intend to go to sleep and not even look at least once every 2 years the L fund is better than that. The allocation in the L funds are fairly vanilla.

Helo80
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by Helo80 » Sun Aug 13, 2017 6:58 pm

TP3 wrote:
Sun Aug 13, 2017 6:30 pm
what would be pros and cons of just putting everything into a L fund
Pros
- Set and forget - no rebalancing
- It's professionally managed
- Very low ERs for being professionally managed (Vanguard target funds are 0.16% versus 0.038% for TSP)
- in a bear market, less volatile as some 15-20% is in F and G


Cons
- Likely a smaller return over the long-run compared to wholly invested in C, S, I, or any combination of the three.
- The 2050 fund composition with F and G makes it a tad conservative with a 30 year investing profile
- Won't quite see the high returns of a really good stock year as it's weighed down by F and G.

trueblueky
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by trueblueky » Sun Aug 13, 2017 7:06 pm

TP3 wrote:
Sun Aug 13, 2017 6:30 pm
what would be pros and cons of just putting everything into a L fund
Pro:
* simple way to hold C, S and I stock index funds and C and F bond funds.
* automatically becomes less aggressive as one ages
* no need to rebalance. Ever.
* new contributions can be at the same AA as the existing holding.
* very low ER, no extra cost for "fund-of-funds"
* several L funds to choose from
* set it and forget it. Easy autopilot for those with other interests.

Many of these pros are the same for other target date funds, although some charge extra for "fund-of-funds"

Con:
* may not have the exact AA you want
* have to spend a minute to see what your current AA is, since it gradually becomes more conservative.
* I Fund does not include emerging markets. If that's important to you, need to hold them elsewhere. This is because I Fund tracks EAFE (same as Fidelity, but different than Vanguard).

retiredjg
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by retiredjg » Mon Aug 14, 2017 9:11 am

TP3 wrote:
Sun Aug 13, 2017 6:30 pm
what would be pros and cons of just putting everything into a L fund
Almost complete portfolio at very low cost that you don't have to manage. The I Fund is missing emerging markets, but if you want that you can hold it in an IRA.

TSR
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Re: TSP Allocation Strategy for the AGRESSIVE Investor

Post by TSR » Mon Aug 14, 2017 9:54 am

Given that your husband is investing in a 2040 fund, I think the only answer here is that you invest 100% in the L2040 fund, or the L2050 fund if you want to be a little more aggressive (which it sounds like you do). Lest you think I'm a hypocrite, I have been 100% in L2040 for about seven years and I couldn't be happier. I have the knowledge and understanding to slice and dice more, but I prefer not to.

Good luck!

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